Preamble

The House met at half-past Nine o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

Famagusta

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Streeter.]

Mr. Tom Cox: I should like to thank you, Madam Speaker, for granting this debate, which will be followed with interest in this country and certainly in Cyprus. The elected mayor of Famagusta has travelled from Cyprus to listen to the debate and is in the Strangers Gallery. I extend a warm welcome to him. I should like to declare my interest. I am the chair of the Cyprus group of the Commonwealth Parliamentary Association. My hon. Friend the Member for Mansfield (Mr. Meale) and the hon. Members for Edmonton (Dr. Twinn) and for Eastbourne (Mr. Waterson) are the other officers of the group. Many hon. Members from all parts of the House are on the all-party Cyprus group.
Cyprus has a long historical relationship with the United Kingdom. It is a member of the Commonwealth and the UK is one of the guarantor powers for the island. The country is known and loved by many millions of British people who have visited it over many years. It is most certainly not some faraway country with which we have no links or know little about. Many of us know that President Clerides served with great distinction in the Royal Air Force during the last war, and that many Cypriot men and women bravely fought alongside members of our armed forces.
In 1974, the Turkish army brutally invaded Cyprus. That led to the division of the island and 21 years later it is still occupied and divided. Over the years there have been many discussions that I and many hon. Members had hoped would lead to an honourable settlement under which the rights of both Greek and Turkish Cypriots—I stress, both Greek and Turkish Cypriots—would have been respected and protected. Sadly and tragically, nothing has happened over the past 21 years to bring about a settlement. That is why I sought this debate.
In seeking to overcome problems one has to make a start and over many years Famagusta has been given as the example of where that start could be made. Since the 1974 invasion it has been a ghost town. No one lives there and no business is conducted in the town, yet before 1974 it was one of the most popular areas in Cyprus because it had beautiful beaches and hotels and a thriving business community lived and worked there. All that could return, and it would benefit the people who would live there—the Greek and true Turkish Cypriots whom I wish to see once again becoming the inhabitants of Famagusta.
I have said that Famagusta could provide the start for a settlement and I should like to repeat some of the comments that have been made over the years. In November 1978, just four years after the invasion, a joint British, Canadian and American group produced a document entitled, "Framework for a Solution of the Cyprus Problem". It proposed the immediate resettlement of Famagusta. Paragraph 12 of the document states:
In order to promote an atmosphere of goodwill and to resolve pressing humanitarian problems, the … (Famagusta) area shall be resettled under UN auspices in accordance with the attached agreements. Such resettlement shall be initiated in phase with the resumption of full intercommunal negotiations on a comprehensive agreement".
In his 1978 report, the then Secretary-General of the United Nations said:
The time may now be ripe for a concrete attempt to deal with some important aspects of the existing stalemate on the ground, thus creating an opening for further significant steps.
The status of Famagusta which obviously should not be kept in its present empty and decaying condition, may provide an opportunity of the kind. Since Famagusta is situated in the immediate vicinity of the buffer zone and is patrolled by UNFICYP troops, it would be seem natural to envisage United Nations assistance in this connection".
There was a high-level agreement between the then President of the Republic of Cyprus, Mr. Kyprianou, and the leader of the Turkish Cypriots, Mr. Denktash. It said:
Priority will be given to reaching agreement on the resettlement of Famagusta under UN auspices simultaneously with the beginning of the consideration by the interlocutors of the constitutional and territorial aspects of a comprehensive settlement. After agreement on Famagusta has been reached it will be implemented without awaiting the outcome of the discussion on other aspects of the Cyprus problem".
That agreement between President Kyprianou and Mr. Denktash was signed on 19 May 1979. Despite all those talks and agreements, nothing has happened.
United Nations Security Council resolution 550 was passed on 11 May 1984. It says that it
considers attempts to settle any part of Famagusta by people other than its inhabitants as inadmissible and calls for the transfer of this area to the administration of the United Nations".
That is why I said earlier that I and our friends on the Conservative Benches want both Turkish and Greek Cypriots living once again in Famagusta. Regrettably, however, nothing happened in the six years after the framework document to which I referred was agreed and recommended in November 1978.
We now reach May 1993 and the report of the Secretary-General of the United Nations, who proposed
a package of confidence-building measures as a first step towards an overall settlement. A key issue in the set of proposals was the opening up of the fenced area of Famagusta to resettlement by its original inhabitants. The area would be placed under UN administration and the owners of property there could obtain possession of their assets. Both Greek Cypriots and Turkish Cypriots would be able to enter the area freely and intercommunal contact and trade would he encouraged. The proposal was accepted by the Greek Cypriot side from the outset but the Turkish Cypriot side failed to give a positive response.
On 4 April 1994, the Secretary-General reported to the Security Council that
the Turkish Cypriot side had not provided the response necessary to make an agreement on the implementation of the confidence-building measures possible".


So again, sadly, nothing happened, but the Secretary-General clearly stated who had stopped the progress that we had all been looking for.
In his report to the Security Council on 11 April 1994, the Secretary-General underlined
the need to conclude an agreement on the implementation of the confidence-building measures".
Against that background and all the recorded facts, can there be any doubt who has stopped the progress that could and should have been made? Is the Minister of State, Foreign and Commonwealth Office in any doubt? Are the British Government in any doubt? The UN and the Republic of Cyprus clearly support and work for the reopening of Famagusta.
What role does Famagusta play today in the life of Cyprus? None whatever. As I have said, it is a ghost town. Nothing is sadder or more distressing than to go into that region of Cyprus, to stand on high buildings, to look into Famagusta, as I have, and to be with Greek Cypriots who say, "That used to be my home, that used to be where I worked." Twenty-one years after the invasion of Cyprus, that is still the tragic position: Famagusta is a ghost town.
Are the British Government, one of the guarantor powers, happy with that? If not, what are they doing to promote the reopening of Famagusta? I and many other Members of Parliament want there to be meaningful involvement by the British Government. They cannot say, "Oh, we have no role to play," or, "There is too much opposition to this proposal." The only opposition is from Mr. Denktash, but again, as with everything concerning a possible honourable settlement in Cyprus, there is always opposition from Mr. Denktash. The views of the UN, of the United States Congress, of the European Parliament and of the Council of Europe are all on record. They all say the same thing: it is Mr. Denktash and his supporters in Turkey who stopped the progress that we want.
I talk, hon. Members talk and, most certainly, the Republic of Cyprus and the UN talk of the full return of Famagusta to its position before the 1974 invasion. The Minister and his officials must not waste their time talking about a gradual return, some of the town being returned and some of it still remaining under the control of Mr. Denktash. That suggestion is totally unacceptable to hon. Members and to the Republic of Cyprus. So I beg the Minister not to waste his time with such suggestions.
We seek, as the United Nations has sought, the full return of the town of Famagusta to the people to whom it belongs—Greek and Turkish Cypriots. With that return must come the full withdrawal from the town and the area of the Turkish army, its place being taken by United Nations peacekeeping forces.
The case for the return has long been made, and we must ask the Minister why it has not happened. I am sure that the House would like to hear his views. For years, when Cyprus has been discussed in the House, the Government, who have been in power for 16 years, have always made the same statement: "Of course we want a settlement, and we fully support the efforts of the United Nations."
Many of us reply, "Good, but what are you doing to create an initiative leading to discussions and to a settlement for Cyprus and its people?" When has an

initiative, any initiative, come from the Government over the past 16 years? It is now 21 years since the invasion, and for 16 of those years the Government have been in power. What can they say now to show their own initiative on Cyprus?
I have here a concurrent resolution published by the United States Congress on 16 March 1995, called, "Supporting a resolution to the long-standing dispute regarding Cyprus". No doubt the Minister has seen it. I could quote at length from that document, but one sentence says it all:
President Clinton appointed a Special Presidential Emissary for Cyprus".
President Clinton and the United States Congress are now to take an active role on the Cyprus issue. What will be the Government's response? Do they welcome that or will they obstruct it? What is their view? I hope that the hon. Gentleman will tell us.
We all know about Turkey's role in Cyprus. Last week Mrs. Ciller, the Prime Minister of Turkey, was in London and met our Prime Minister. She can offer nothing to help him in our coming general election, but we all know what she wanted—this country's support for Turkey's application to join the European customs union, and in her forthcoming election campaign.
We all know how high-level politics are conducted; there are trade-offs. So my question to the Minister is: what did Mrs. Ciller offer? Did she commit Turkey to work genuinely now for an honourable settlement in Cyprus? And what did the Prime Minister ask her to do? I hope that the Minister will tell us.
At the beginning of my speech I mentioned Cyprus and membership of the Commonwealth, and a statement on Cyprus was made at the recent Commonwealth Heads of Government meeting in New Zealand. It gave total support to the United Nations resolutions on Cyprus—resolution 365, passed in 1974, resolution 550, passed in 1984, and resolution 939, passed in 1994. The Heads of Government also called for the
withdrawal of all Turkish forces and settlers from … Cyprus, the return of the refugees to their homes"—
a statement that was fully endorsed by the conference.
The Commonwealth, the United States Congress and the United Nations all say the same thing. So when shall we at long last start to see commitment and support from the Government for those statements? If the Government support them, there can be no other issue, as I have tried to outline by detailing what successive Secretaries-General of the United Nations have said.
The reopening of the town of Famagusta would start off the actions and policies that would lead to the end of the division that, tragically, still exists in Cyprus, and to the end of the long suffering of both communities, Greek and Turkish. The challenge now is for the Government. What will they do now to back up the attempts that have been made, especially with regard to reopening Famagusta?

Dr. Ian Twinn: I congratulate the hon. Member for Tooting (Mr. Cox) on obtaining the debate, and thank you, Madam Speaker, for granting it. A debate on Famagusta and its occupation for 21 years by Turkish troops is long overdue. But before I make my speech I declare an interest, in that my family and I were the guests


of the town council and the mayor of Famagusta for three days in the summer—although, sadly, we could not reach Famagusta itself.
Famagusta was the third largest city in Cyprus, with 60,000 people in its municipal area. Those people are now refugees—some living in other parts of Cyprus, some in my constituency in north London, some in Australia and some in the United States. They are spread around the world, and they have not been back to their homes.
I have not been to Famagusta itself, but like the hon. Member for Tooting I have stood at the barbed wire, looked down into the town and talked to the United Nations troops who keep us out. I have seen the Turkish troop emplacements keeping watch on us as we look down at the ghost town of Varosha, a suburb of Famagusta that was cynically fenced off by the Turks so that it could not be occupied.
Varosha now stands crumbling and overgrown; in people's homes the curtains blow in the wind and their goods—washing machines, televisions and other personal possessions—have been looted by Turkish troops. Family photographs still stand there in place.
I am sure that no hon. Member who meets refugees from anywhere in the world can fail to be moved by their personal circumstances, but Greek Cypriots can go to the dividing line, the green line, today and see their homes, their gardens and their fruit trees—but they cannot get to them. At the same time they know that their possessions are not being used by anyone else, but are being wasted in the most cynical way by the Turkish Cypriot administration that has taken possession of more than one third of the island of Cyprus.
That administration is unrecognised by anyone other than Turkey, which has tens of thousands of troops ensuring that it keeps possession of that part of the island. As many as 80,000 settlers have also been brought in from Turkey, in a mass movement of population unprecedented in 20th century Europe. The House should state firmly its total opposition to what has happened in Cyprus over the past 21 years.
The story of Famagusta is the story of Cyprus, and the House cannot discuss the town separately from the issue of what has happened in the whole of Cyprus. The future of Famagusta depends on the future of negotiations and on reaching a settlement which will allow Turkish and Greek Cypriots to live together in peace on their island. It is their island; it does not belong to the 80,000 settlers or to the 40,000 troops. It belongs to Cypriots.
As an officer of the Cyprus committee of the Commonwealth Parliamentary Association, along with the hon. Member for Tooting, I feel very strongly that I am here to argue for the interests of all Cypriots—not for Greek Cypriots and not for Turkish Cypriots. There is a balance to be achieved. Both communities in Cyprus have every right to expect to live their lives in peace and be able to go to their home areas, to enjoy their own property, whether they are Turkish Cypriots who cannot get down to Paphos where their land was, or Greek Cypriots who cannot get to Famagusta, Kyrenia or Morphou. None such restriction is acceptable. We have a duty to continue trying to achieve a solution in Cyprus which allows all Cypriots to enjoy their own island.
The history of the past 21 years in Cyprus is littered with messages of good will from politicians from around the world. We have already heard that it is littered with

UN resolutions. The UN resolutions cannot be objected to; they are wonderful and say exactly what we want to achieve. Yet 21 years on, we have achieved none of it.
Declarations of good will are not enough by themselves. Varosha is still a ghost town. The hotels along the beautiful Famagusta sea front are empty, and when people try to see them, even from the sea, Turkish gunboats appear to turn back local residents. The same is true of Morphou at the other end of the island. It is totally inaccessible to the people to whom it belongs. The same is true of Kyrenia since people fled from the original invasion, never to return and see their homes. We must ask our Government to do everything that they can in the world community to ensure that the Turkish troops and the settlers leave, and that Cyprus is returned to the people to whom it belongs.
None of that of course will be easy—we know that. We can go into great detail about the nature of the 1960s constitution, why it broke down and how the two communities failed to work together. But whatever conclusions we reach, wherever we want to apportion blame, some of the blame has to come back to Britain. We have a strong responsibility in Cyprus. We helped to construct the constitution. We have been close advisers in the post-independence era. We have a duty as one of the three guarantor powers of Cyprus to ensure that it is returned to democratic health and that Turkish and Greek Cypriots are able to enjoy their own land.
So we cannot stand back as a country, whatever some British people say they want. We cannot cynically stand back and allow Cyprus to carry on in the way that it has. Cyprus is divided; it is the only European country divided by barbed wire where troops keep two parts of the same population apart. The capital city of Nicosia is divided. It is a beautiful and wonderful city, and I have been privileged to see both sides of it in recent years. Indeed, I have seen both sides of the same street which had a derelict area in the middle. That is a heart-rending experience for anyone.
One day, I am absolutely sure that the nightmare of Cyprus will end. It is not a question whether Cyprus will remain divided for ever. That will not happen and those people who believe that an acceptable solution has been found in the division of Cyprus—we have heard such sentiments expressed from both sides of the House in the past—are deluding themselves. The interests between Greek and Turkish Cypriots are so strong, the island so small and the economic necessity of getting together so significant, that one day there will he a solution. Therefore, we must turn our minds to what can be done to bring the two communities together.
It is not right for us as foreign politicians in Cyprus to dictate the solution. The days of Britain doing that around the world are over—perhaps that is rather a good thing. We can, however, stand behind both communities and give them the reassurances that they need and ensure that any solution will be fair.
My involvement in Cyprus is very much concerned with helping in any way that I can to bring the two sides together and ensure that a solution becomes possible. I certainly do not accept Turkey's pre-eminent role in that region as being a barrier to a solution in Cyprus. I am afraid that too many people accept that the power which Turkey represents is too important to cross in a region where we look for stability. The occupation of Cyprus by troops is not legitimised by Turkey's obvious power.
While supporting both sides in efforts to get together for talks to try to reach conclusions on what a solution may be, we have at times all been guilty of encouraging the legitimate Government of Cyprus to make concessions, which have been readily accepted as a fact by the Turkish Cypriot Administration. But nothing reciprocal has followed and negotiations have broken down. In subsequent negotiations, the Government's concessions have been taken on board and more has been demanded. There has been a ratchet effect, which we saw with the confidence-building measures and the suggestion that one eighth of Famagusta—the fenced Varosha area—should be made over to some sort of free town.
That was a good idea if it was to be based on moving forward to a solution for the whole of Cyprus. Many of us thought that if that area was just to stand alone as a small gesture, it was not worth having. I am afraid that we are in a such a position now. It is very difficult to imagine anyone putting their money into redeveloping the small, fenced area of Varosha, which would be surrounded by Turkish troops and have inadequate safe access for Greek Cypriots. It has been empty for 21 years, shrubs and trees grow in the roads, buildings are crumbling, and it would cost a lot of money and several years' work to make it inhabitable again.
I would like Famagusta—a much larger area than Varosha—made over as a free town. I would like it to become an economic free zone. It has a tremendous future. That change could happen regardless of whether it would lead to an immediate solution within Cyprus, provided that it was administered by the United Nations as a UN town where there was equal access for both communities.
I speak purely in a personal capacity. As someone who believes passionately in the operations of the free market, perhaps the House will forgive me for thinking that it is a jolly good chance to demonstrate that the free market can bring together people of two communities. Such a move cannot happen with just Varosha because it is too small and insecure for people to commit their capital to it. But that is not what we should be arguing about today. We should be arguing about achieving a solution in Cyprus, not only Famagusta. I do not want Famagusta to be traded off to allow the rest of the northern part of Cyprus to remain occupied—that is not acceptable.
I have been impressed over the years by the position taken by my right hon. and hon. Friends in the Government, who have readily understood that Britain has a moral duty in Cyprus and that the status quo in Cyprus is not acceptable. That has to be countered by the fact that we are not a power which can tell the Turks, with the use of military might, to go back where they came from. We have to work in co-operation with our European Union partners and I am glad that we are.
I am also pleased that a firm commitment has been made to begin negotiations six months after the intergovernmental conference, and that Cyprus can look forward to joining the European Union whether or not the Turkish Cypriots want to join. I would much rather the Turkish Cypriots were part of it. None the less, no one can be allowed to blackmail processes surrounding Cyprus's entry into the EU.
I am also encouraged by the fact that the Americans are now turning their minds to what happened in 1974. Given that, and with the President of the United States of

America here today, he might like to consider America's part in the events of 1974. With the Congress now thinking positively and in a quite unified way about the future of Cyprus, and with the President putting some energy into the issues in Cyprus, perhaps the President will talk to his Secretary of Defence about the influence that the American defence institutions have on the Turkish military. If the President commits himself to that, it will be the most positive thing that he could do to achieve a settlement in Cyprus.
I shall certainly continue to work hard to ensure that we have a solution. The solution, however, must be just and fair for all Cypriots.

Mrs. Barbara Roche: I congratulate my hon. Friend the Member for Tooting (Mr. Cox) on his success in obtaining today's debate. He is well known among hon. Members for his commitment to Cyprus and for having brought the situation there to the attention of the House over many years.
I had the great honour and privilege—I declare an interest—to be a weekend guest at the Morphou municipality's rally in October. The municipality is operating in exile because Morphou, like Famagusta, cannot be visited by Greek Cypriots. People whose roots were there for generation after generation cannot visit their homes. They are prohibited from visiting the graves of their fathers, grandmothers and grandfathers, and they cannot tend the orange groves that have been in their families for generations.
It is appropriate that today—21 years after that terrible invasion and occupation of 1974—we are debating the reality of life in Famagusta. What was once a prosperous and thriving place with an extremely successful tourist industry is now a ghost town. For the many tourists who visit Cyprus each year, it must be absolutely inconceivable that there is a part of this beautiful and successful island where nothing moves and where people have given way to rats.
We must examine the overall situation in Cyprus. Twenty-one years after the invasion, many people are still refugees in their own country. There are, of course, no refugee camps in Cyprus because the Republic of Cyprus has absorbed its refugees. They are very successful members of society who play their full part in the political, economic and social fabric of their country. As far as the international community is concerned, that has almost played down the urgency of finding a solution for the problem.
Cyprus is a small country—a small island. It is a member of the United Nations, a member of the Commonwealth and an independent country occupied by a foreign power. At the last count, there were about 400 tanks on that small island, which is an obscenity. That is not right, and it cannot be tolerated.
In the illegally occupied far north of the island there is the scandal of the enclaved people, whose human rights are violated daily. That has been catalogued by the United Nations. There is also the scandal of the missing people. Many families in my constituency—I know that I always say this, but it bears repeating—do not know what has happened to their missing relatives. The time for this debate is short, and I do not want to take up the time of


other hon. Members who wish to speak, but in his reply on the future of Famagusta I should like the Minister to concentrate on those missing people.
What will be Britain's role in finding a solution? Britain is a guarantor power and has a very special relationship with Cyprus. In the past 10 years, however, Ministers have paid very few, if any, visits to examine the situation in Cyprus rather than consider the Government's defence role. Will that record change? It is important that Turkey and the illegal regime of Mr. Denktash do not have any veto on Cyprus's application to join the European Union. Some of the Prime Minister's remarks do not fit well with that aim. I should like to hear the Minister give a clear assurance that there will be no veto, nor a de facto veto.
It is important when we debate the situation in Cyprus that we do not merely say that we will support the best endeavours of the United Nations, although those are vital. Britain's importance in the region calls for something more, and we can play a unique role in negotiations with our American partners. In our language, we must not fall into the trap of talking about the situation in Cyprus as if it is some sort of intercommunal dispute between two parties, because it is not. It is a dispute between the sovereign, independent Republic of Cyprus and an illegal regime backed by a foreign occupying power. Our language must be correct.
If we take those actions, I am sure that we will find a just solution for the beautiful places that once were and can again be Famagusta and the island of Cyprus.

Mr. Edward O'Hara: I, too, congratulate my hon. Friend the Member for Tooting (Mr. Cox) on securing this important debate. It is a well-timed debate because tomorrow is St. Andrew's day. St. Andrew is closely associated with the town of Famagusta, and there is great affection among the people of Famagusta for the monastery of Apostolos Andreas, far up in the north-east of the enclaved Karpa peninsula. It may behove the House today to remember the plight of the people who are trapped in that enclave.
Andrew is also the name of Mr. Pouyouros, the mayor of Famagusta, whom we welcome to London today and whose name day is tomorrow. It is therefore particularly appropriate that we have this debate today. I declare an interest. I was briefly the guest of the municipality of Famagusta and that of Morphou at the demonstrations earlier this summer, and I was proud to be able to support the demonstrations against the injustice of the present occupation of northern Cyprus.
I should like to explain the terms Famagusta and Varosha, because there is some confusion about them. Early-day motion 110 deliberately refers to Famagusta-Varosha. Famagusta in Greek is Ammochostos, which means "town covered with sand". That shows the long history of occupation of this site, which goes back more than 30 centuries to the iron-age settlement of Enkomi, through the classical settlement of Salamis—associated with Homeric heroes in ancient history—to the Byzantine era, when the name Ammochostos first appeared.
Famagusta was the name bestowed on the town during the Venetian occupation. It was then one of the biggest harbours and trade centres in the eastern Mediterranean 239912 T

and Othello's tower, which was built into the massive walls of old Famagusta, was the inspiration for Shakespeare's play. When the town was conquered by the Ottoman Turks in 1571, the Greek inhabitants were ejected from the walled city of Famagusta, but they did not leave the area and settled in the suburbs. "Varosh" is the Turkish word for suburb, so Varosha refers to the suburbs of Famagusta.
In modern times, Famagusta has two meanings. The name refers to the old walled town of Famagusta, which dates back to medieval times, and to the walled town and suburbs of Varosha. Famagusta can mean both, and it is important to have that clarified on the record. The British occupied the town in 1878, and I shall mention that again in my concluding remarks.
In the course of its history, Famagusta became one of the jewels in the economy—if not the greatest jewel—of Cyprus. It was not only an important trading centre, but—in more modern times—an important tourist and holiday centre. Golden Sands beach in Famagusta bay is one of the finest beaches in the Mediterranean. The tourist industry was inhibited by the EOKA troubles in the 1950s, but after the independence of Cyprus in 1960 the tourist industry of Famagusta really took off.
In 1974, on the eve of the Turkish invasion, Famagusta was a flourishing economic and cultural centre, and we should remember that a high level of culture had developed there. It is important to note that Famagusta was not overrun in the first invasion of northern Cyprus in July 1974, after which the Turkish army should have withdrawn under the treaty of guarantee. Under that treaty, the Turkish army had the right to intervene to facilitate the restoration of the status quo. When the coup d'état was overthrown in 1974 and the legitimate Government reinstalled, the writ of the Turkish invading forces expired and they should have withdrawn. But they did not, and on 14 August 1974 they launched a second invasion and Famagusta was overrun on 16 August.
It was obvious that the Turkish tanks were overrunning the fertile Mesaoria agricultural plain, and they also took the high and low roads between Famagusta and Nicosia—two of the most important roads on the island. When the Turkish army occupied Famagusta, it expelled the Greek inhabitants. There was a tragic exodus of refugees, and the town was fenced off. The town was not resettled, and Famagusta is almost unique in this sense. It became a ghost town—a term that has been used today and which was coined by a Swedish journalist in 1977 who recorded his visit to the town thus:
The asphalt on the roads has cracked in the warm sun and along the sidewalks bushes are growing.
Today, September 1977, the breakfast tables are still set, the laundry still hanging and the lamps still burning.
Famagusta is a ghost-town".
As my hon. Friend the Member for Tooting said, if one goes to an elevated position at Dherenia—the closest village to Famagusta beyond the barbed wire—and looks through binoculars at the skyscraper hotels of the ghost town of Famagusta, one sees the tragic waste of an economic jewel. Adjacent to the barbed wire at Dherenia, there is a house that belongs to the family of a friend of mine, Mikis Xenophontos Ioannou. He would have been here today if business had not otherwise detained him in Cyprus. Xenophontos means the son of Xenophon, and old Xenophon—Mikis's father—rebuilt his house hard up


against the barbed wire. That house is still there on the free side of the barbed wire, and that is one of the strongest indications one could have of the attachment that people have to the land that they rightly regard as their own.
I shall read a short excerpt from a poem which gives expression to that feeling. The poem, by Clairi Aggelidou, is called "The Day of Return":

"Save the key. It unlocks the house
When you go, you can open it up.
Keep it in a place that's safe
and do clean it up
now and again.
So it will be ready
when they say
'you can return …',
I won't return, like I thought,
you will,
once more you will see
the orchard and the walnut tree
I planted …
Guard the key.
Our yard will smell
of jasmin flowers
the Vine will be in fruit
though untrimmed for years."
Two more lines of the poem read:

"Do not cry.
Just guard the key well."

That is a tragic expression of the feelings of the people of Famagusta for the town which they look upon but to which they cannot return. Mikis Ioannou himself has written much moving poetry about his home town of Famagusta.
I have strong feelings about the town, because I spent some of my formative years in the area. I was a young soldier between the ages of 19 and 21 in the Famagusta area, and Famagusta was, in a sense, my home town. I walked the streets of Famagusta and Varosha, and I recognise the hotels that I can see through binoculars. Mr. Pouyouros was, in a sense, my mayor when I lived in Famagusta, and he has been the mayor of Famagusta from 1953 to the present day. I hope to see the day—I vow to see the day—when Mr. Pouyouros walks freely and with full dignity through the streets of Famagusta once again as its mayor.
The situation in Cyprus is tragic, and the situation of Famagusta within Cyprus is tragic, too—it is a tragedy within a tragedy.
The second invasion was not an afterthought but a land grab, by which those occupying 37 per cent. of the territory secured two thirds or more of the productive capacity of Cyprus, which is contained within their territorial mass.
As the seizure of Famagusta in 1974 was the keystone of the invasion, so Famagusta could be the key to a solution. One might suppose that it has been kept as a bargaining point.
My hon. Friend the Member for Tooting listed the various high-level statements and resolutions between 1978 and 1994, so I will not burden the House by repeating them. In conclusion, I suggest that, after all the years of prevarication, it is time that progress was made on the solution to the Cyprus problem and that a commencement of that solution should be the occupation

and resettlement of Famagusta by its legitimate inhabitants—not as a fenced-in enclave, as Mr. Denktash insists, but in the form suggested by the hon. Member for Edmonton (Dr. Twinn). Again, I will save time by not alluding further to that suggestion.
At a time when we have seen progress in South Africa, the middle east, Bosnia and, today, in Northern Ireland towards what we hope are solutions to apparently intractable international problems, we must be optimistic and determined that progress can also be made towards a solution to the problem in Cyprus. As my hon. Friend the Member for Tooting said, the United Kingdom has multiple responsibilities in that respect. As the former colonial power, a senior member of the Commonwealth, which has expressed its support for the United Nations resolutions, a member of the Security Council and of the European Union, I call on the Government to show the renewed determination shown by the American Congress and President Clinton to finding a solution in Cyprus.
In the terms of early-day motion 110, I call
upon Her Majesty's Government to press for the restoration of the fabric and infrastructure of Famagusta-Varosha and the resettlement of the town by the legitimate Greek and Turkish residents under the auspices of the United Nations, so that the two communities,"—
Turkish and Cypriot—
by demonstrating that they can live and work together in peace and friendship, may engender that inter-communal trust and confidence upon which a wider and deeper solution to the Cyprus problem may be securely founded.

Ms Joyce Quin: Like all other hon. Members who have spoken, I congratulate my hon. Friend the Member for Tooting (Mr. Cox) on applying for and being granted this Adjournment debate on Famagusta and Cyprus. Once again, my hon. Friend has revealed to the House his extensive knowledge of the situation in Famagusta and Cyprus and his arguments have been backed up by the very evident knowledge of all hon. Members from both sides of the House who have spoken.
Many of us feel that Cyprus does not, perhaps, command much public attention, although people might feel that they now know something about it, rather unexpectedly, because of the evil machinations of one Francis Urquhart in "The Final Cut".
We have heard a rather more accurate picture of events in Cyprus, and much genuine concern about the need to get the reunification process started again and some real progress, from hon. Members on both sides of the House. Many important points have been made in the debate and I echo the comment of my hon. Friend the Member for Tooting, and other hon. Members, who said that Famagusta-Varosha is the best place to begin the confidence-building process and progress towards the peaceful reunification of Cyprus.
The history of Famagusta-Varosha is a sad one, as has been pointed out. Although I have not visited the area or viewed it from the barbed wire, which the hon. Member for Edmonton (Dr. Twinn) described, I have none the less been struck by some of the accounts of
palm trees piercing through cracked tennis courts and leaning on crumbling rat-infested seaside villas",
and
here a padlocked Barclays Bank … there a gutted sandwich shop listing the prices of 20 years ago".


There is no doubt that Famagusta epitomises the tragedy of the separation and division in Cyprus. People in both communities have been deprived of their homes, indeed of their roots, and forced to move from places in which their families have lived for generations. Even today, people can go to the green line and see their home, but they cannot occupy it.
Like other hon. Members, I pay tribute to the mayor of Famagusta. It is striking that the structures of local government have been kept in place, despite the fact that Varosha is a ghost town. The spirit of a unified Cyprus, which remains strong, is embodied in the work of the mayor and his colleagues, who try to ensure that the community that they once represented in Famagusta survives and has some hope for the future.
As has been said, the area has become the focus of confidence-building measures in Cyprus—measures to try to create conditions for future reunification. It is still true, however, that the level of mistrust is very high. Indeed, I read only a week or so ago press reports of young people shouting insults to each other across the green line that divides the country. Perhaps it is not surprising, although it is highly regrettable, that there is a climate of bitterness—a climate that is not always conducive to long-term living together.
I am also struck, however, by the number of people in Cyprus who want to embark on the confidence-building approach and who see an opportunity to do so in the immediate future. I strongly agree with my hon. Friend the Member for Hornsey and Wood Green (Mrs. Roche), who drew attention not merely to the political but to the economic potential of such measures. As has been said, the area concerned had huge economic potential 20 years ago as a tourist resort and was a centre for service industries and other types of economic activity.
Confidence-building measures would be of immense importance to Turkish as well as to Greek Cypriots. The adjoining area of Turkish Cyprus is not well off economically. We hear many accounts of the increasing economic disparity between the Turkish and Greek Cypriot areas. Greek Cypriots are said to earn, on average, three times as much as Turkish Cypriots and the discrepancy seems to be growing. There is enormous economic potential that can be mobilised for the future.
I look forward to hearing what the Minister has to say in his reply. I hope that he can give us a progress report on the attempts to move towards confidence building and to finance some economic activity in the area. We know that money is available in the European Union for activities in the Mediterranean. Also, when Cyprus moves towards European Union membership, it will be eligible for EU support. I hope that the Minister will address that point.
In the past few days, we have read many accounts about the European Mediterranean agreement, which brings together a large number of Mediterranean members of the European Union and their neighbours. It includes Cyprus and Turkey as well as Greece, as a Mediterranean member of the European Union. We believe that that is an important framework which can be used to bring both political and economic benefits to the region. We applaud the fact that within the European Mediterranean agreement there are commitments to democracy, human rights and the rule of law as well as to free trade and economic co-operation. We are keen for that to be built on in future.
My hon. Friends have referred to the question of European Union membership for Cyprus. The Labour party is anxious to promote that as much as possible. Indeed, we hope to be in government when we welcome Cyprus into the European Union and to take part in the negotiations with Cyprus, which are due to start six months after the end of the intergovernmental conference which begins next year.
Cyprus's move towards membership of the European Union could be an important part of bringing about the peaceful reunification of the island. For that reason, we want progress. We are aware of the situation in respect of the customs union with Turkey. Although we will continue to express our grave worries about human rights in Turkey, we accept that some moves have been made.
We also understand the dangers of fundamentalism in Turkey and of Turkey's looking too much to the east, rather than the west. I accept those points, but none the less reiterate what my hon. Friend the Member for Hornsey and Wood Green said and hope that the Government, as well as the United States, will put pressure on Turkey not only in respect of human rights but to adopt a favourable attitude toward Cyprus's membership of the European Union. As several hon. Members have said, we do not want Turkey to have a veto over Cyprus's membership of the European Union. European Union membership can be part of the solution to the Cyprus problem and we must keep that in mind.
We believe that the future lies with a reunited Cyprus which respects human rights and different cultural and religious traditions and allows them to flourish in the Cyprus and the European Union of the future.

The Minister of State, Foreign and Commonwealth Office (Mr. David Davis): Cyprus matters to the United Kingdom. It is rightly the regular focus of attention in the House and the hon. Member for Tooting (Mr. Cox) has found an ingenious and appropriate avenue for the discussion of the problem of Cyprus. I congratulate him on that and join him in welcoming the mayor of Famagusta to our proceedings.
This has been a wide-ranging and rather long debate, so I shall be pressed for time. To a large extent, it has also been measured and well informed. I commend hon. Members for that. My hon. Friend the Member for Edmonton (Dr. Twinn) made a particularly wise contribution.
Famagusta is a window on the serious problems that beset the island of Cyprus. The city, as many hon. Members have said, is a symbol of the long dispute between the two communities—a dispute which has led to the tragic division of the island. The hon. Member for Tooting ranged wide in his speech. The House has said that it expects me to range beyond the troubled boundaries of Famagusta and to recap on Government policy on Cyprus. Indeed, the hon. Member for Tooting asked me what we are doing to promote a settlement. I shall, in the time available, endeavour to answer as many questions as I can on those subjects.
The natural advantage of a good harbour has meant that Famagusta has been at the centre of events that have shaped the eastern Mediterranean. The ancient walled city has been the target of many imperial ambitions. As one


of the main emporiums of the Levant in the middle ages, it is not surprising that it became an ethnic and religious melting pot. It is, of course, the "Sea-port Town in Cyprus", the backdrop to the "Cyprus Wars" in "Othello". It is no stranger to war—tens of thousands perished on both sides in the siege laid by the Ottomans in 1570–71, to which the hon. Member for Knowsley, South (Mr. O'Hara) referred.
Famagusta retained its economic importance into modern times. In 1960, when Cyprus became independent, it was the island's third city with large Greek and Turkish Cypriot communities. The modern commercial town facing the beach became a tourist riviera and thus a significant contributor to the Cypriot economy. The city was the island's principal port until 1974.
The fate of Famagusta and the suburb of Varosha, or New Famagusta—I am grateful to the hon. Member for Knowsley, South for explaining the details of those names—after the Turkish intervention touches a raw nerve for many Cypriots. Its significance for both communities is not difficult to understand. The walled city of Famagusta was a Turkish Cypriot enclave which endured its share of sufferings in the intercommunal violence of the 1960s and 1970s. The 35,000 people who fled Varosha in August 1974 were a substantial portion of the total number of Greek Cypriots displaced during the tragic events of that summer.
The Turkish decision to fence off Varosha and effectively prevent any settlement has created, as many hon. Members have said, one of the strangest sights in Europe. The spectacle of crumbling luxury apartments left to rot for the past 21 years—a ghost town, as hon. Members have called it—is a symbol of the Cyprus problem.
Who has benefited from this monument to waste? Certainly not the Greek Cypriots, who have been deprived of their property for so long; nor the Turkish side, which has to guard a decaying ghost town. It might seem perverse that the international community insists that Varosha, as a fenced-off area with no settlement, retains its special status, but the fact that it is a closed area keeps alive the hope that, one day, its original inhabitants might return.
The Security Council of the United Nations, in its resolution 414 of 15 September 1977, made clear its concern that any moves by Turkish Cypriots to settle Varosha would harm the prospects for a settlement. That is still the position today. The international community has been periodically alarmed by reports of plans to move into parts of Varosha. We continue to believe that any action of that sort in the absence of a settlement would be a setback.
Against that background, it is not hard to understand why Varosha has been at the centre of efforts to reconcile the two communities since 1974. In the sad logic of prolonged disputes, the simple fact is that the Turkish side has something which the other side wants back. In the aftermath of the events of 1974, there were hopes that a solution to Varosha could he found quickly. We have heard a good account of that from the hon. Member for Tooting. As a closed area, there were no serious practical obstacles to handing Varosha back, but repeated efforts to make progress have yet to find an acceptable means to end this absurdity once and for all.
There have been various ideas for resettlement under United Nations control. Indeed, each phase of the all too fitful intercommunal talks has involved a negotiating package for Varosha. Just over a year ago, it seemed that both communities were finally prepared to commit themselves to arrangements which would allow Varosha to come alive again.
During 1993–94, the United Nations Secretary-General and his representatives worked with both communities on a package of confidence-building measures, or CBMs in the Foreign Office jargon. The proposals envisage the resettlement of Varosha as an area for bi-communal contacts and enterprise and the reopening of Nicosia international airport. Both would remain under United Nations control. The package contained real benefits for both communities. The United Nations worked non-stop to close the gap between the sides. Unfortunately, in the end, neither side managed to seize the opportunity. Success would have cleared the way for direct contacts on the basis of a settlement.
Failure meant each side retreating into familiar recriminations. In June 1994, Mr. Denktash set out—admittedly at a very late stage—the circumstances under which he could accept implementation of the confidence-building measures. I can well understand the frustrations of the Greek Cypriot side at that response. I can understand that, after months of waiting for Mr. Denktash to say yes, they felt frustrated when he replied, "Yes, but".
However, we believed that, even at that stage, there was value in pressing on with efforts to reach an agreement on the confidence-building measures. We still believe that such an agreement can only be helpful in achieving the wide objective of a settlement in Cyprus. We believe that the package is still viable, and Mr. Denktash's decision in January to accept the CBM package was a welcome, albeit belated, move. Both leaders would earn the plaudits and the encouragement of the international community if they returned to the CBM package.
As to the Turkish position, I was asked about the meeting that took place between my right hon. Friend the Prime Minister and the Prime Minister of Turkey, Mrs. Ciller, last week. They both agreed that it was high time for progress on the issue, and my right hon. Friend left Mrs. Ciller in no doubt about the role that we expect Turkey to play. Turkey can exert a positive influence on Mr. Denktash and we made it clear that we want that to happen.

Mr. Anthony Coombs: Will my hon. Friend give way?

Mr. Davis: I am very short on time and I am afraid that I cannot allow any more interventions.
Why is the situation in Famagusta and Varosha important to the House and to Britain? Human compassion for those of both communities who have suffered is of course one reason, but the wider Cyprus problem and the search for a settlement is an issue at the centre of British foreign policy.
Cyprus has long been important to British interests. I could spend a good deal of time talking about the history of our relationship, but it has been already been recounted by other hon. Members. We do not need to look very far for evidence of the closeness of our relationship. Cyprus draws 1 million British tourists to its shores every year.


People of Cypriot origin are part of the landscape in Britain—especially in London—and they have made a welcome contribution to British society.
We also have an important and substantial trading relationship with Cyprus. Some 10 per cent. of all exports to Cyprus—worth £230 million—are British and our imports from Cyprus amount to £136 million. It is also necessary to recall that our two sovereign base areas in Cyprus remain of fundamental strategic importance to the United Kingdom and the west. The Gulf war was a strong and a recent reminder of that fact.
A distinguished British observer of the Cyprus scene during the past three decades has commented:
Nobody won and everybody lost by reason of this futile conflict".
I agree. The division of Cyprus since 1974 has been damaging and wasteful, as Varosha itself illustrates. It cannot go on. We have always said that the division of the island is unacceptable. Our efforts and those of the international community continue to aim for a solution based on reconciliation between the two communities.
We are bound by history and by a moral duty to do all that we can to help to find a solution. The international community also plays it part, but neither we nor it hold the solution in our hands. Only the main protagonists, the two Cypriot communities, can decide what arrangements they can live with, but we can and must assist with advice, encouragement, support and even a degree of arm-twisting—hon. Members know that I am not very familiar with that—if we judge that it will help.
My hon. Friend the Member for Banbury (Mr. Baldry) took the House through recent developments when we last debated Cyprus. He said then that the status quo was not acceptable, and he was right. I shall now recap events and bring the House up to date on the Cyprus situation.
The United Nations Security Council resolution 939, passed on 29 July 1994, called for a fundamental and far-reaching reflection on ways of approaching the Cyprus problem in a manner that would yield results. It also called for the earliest possible implementation of the confidence-building measures that are so important for the future of Varosha.
In October 1994, the UN Secretary-General invited the two community leaders to talks with his representative in Cyprus. That offered a welcome opportunity for the two leaders to meet face to face and to discuss the issues between them. We were hopeful that a new willingness to compromise was emerging. President Clerides adopted a useful and a positive approach to ways of achieving a settlement, and Mr. Denktash reaffirmed his commitment to a bi-zonal, bi-communal federation. We were disappointed that nothing concrete emerged from the meeting, but we remained hopeful that those contacts might form the basis of further contacts.
The United Nations continued its contacts with the two leaders, encouraging them towards a common perception of the kind of trade-offs needed to make real progress. The build-up to elections in northern Cyprus in April inevitably produced a pause in international efforts. As the House knows, Mr. Denktash was re-elected. We shall not let him forget that, during his election campaign, he said that he saw himself as the candidate best fitted to negotiate a settlement for the Turkish Cypriot community.
The House will be aware of the exploratory discussions between representatives from both communities in Cyprus which took place in London in May. The objective of the talks was to generate momentum behind the UN efforts to find a settlement. We felt that that might be achieved through confidential contacts away from the intense gaze of publicity in Cyprus. Both groups met American and British representatives to talk over the issues and to share views on the paths and obstacles to progress. They also had direct discussions with each other.
If I say that there was a helpful exchange of views, hon. Members will know that that is diplomatic language to describe meetings which did not yield as much as we had hoped, but it does not mean that that approach to the issue was worthless. We and the Americans still believe that confidential contacts can provide a way forward. However, I stress the word "confidential"—both communities must resist the urge to play to the gallery.
The British high commissioner and the US ambassador in Nicosia have unstintingly maintained contact with both leaders and urged them to focus on the main ingredients of a settlement. The US presidential envoy, Richard Beattie, will visit Cyprus next week to follow up the London talks. It is important to remember that there are a number of strands to the international efforts to find a settlement. We welcome the appointment of Dick Beattie and we have been fully and closely involved in his activities and initiatives—including the May talks in London—and in preparing the ground for his forthcoming visit to Cyprus. The London talks were a product of our collaboration with the Americans. They were a brave attempt, but they did not constitute a new, self-standing initiative. As I have said, they support the mission of the United Nations Secretary-General.
That is also true of progress on the route now mapped out for Cyprus's accession to the European Union. The House might find it helpful to have an account of where we are on that route. The Republic of Cyprus applied to join the European Union in July 1990. The European Commission submitted an opinion on Cyprus's application in June 1993. The opinion confirmed Cyprus's European identity and character and its vocation to belong to the Community. It also clearly envisaged that the accession process would provide an opportunity to resolve the central elements of the intercommunal dispute—I was pleased to hear the Opposition spokesperson confirm that view today. The opinion states:
the fundamental freedoms laid down by the treaty … could not today be exercised over the entirety of the island's territory.
These freedoms and rights would have to be guaranteed as part of a comprehensive settlement restoring constitutional arrangements covering the whole of the Republic of Cyprus".
In Corfu in June 1994, the Heads of Government of the European Union agreed that Cyprus would be involved in the next stage of enlargement. That view was reaffirmed at the Essen European Council in December 1994. The Commission reviewed the question of Cyprus's accession to the European Union in February, and that review confirmed Cyprus's suitability for accession.
A further step was taken at the Foreign Affairs Council on 6 March. The council's conclusions outlined the circumstances under which accession negotiations will start, six months after the end of the 1996 intergovernmental conference. The Council called for progress in the intercommunal dispute and noted that some useful points had been identified recently.
The European Union's Association Council with Cyprus has since set out a substantial pre-accession strategy, with a structured dialogue. The first ministerial meeting between the 15 European Union countries and Cyprus took place on 21 November. The dialogue on political issues and the pre-accession strategy will serve to bring Cyprus closer to the European Union before formal accession negotiations begin.
Significant progress has been made on the road to Cyprus's accession to the European Union, and we have been at the forefront of that progress. Indeed, in March 1995, President Clerides singled out Britain among EU member states for our helpful contribution regarding Cyprus. We are grateful for his compliment. We have indeed been working hard on Cyprus's behalf.

Mr. Deputy Speaker (Sir Geoffrey Lofthouse): Order. Time is up.

Fire Services (North Worcestershire)

11 am

Mr. Anthony Coombs: I want to draw attention to a matter of great controversy and sensitivity in my constituency—proposals to change fire cover in the Wyre Forest and north Worcestershire area.
I start by paying tribute to the firemen of the Worcestershire and north Worcestershire area, who do a magnificent job. Indeed, two members of the Hereford and Worcester brigade lost their lives in 1993, fighting a fire in Hereford.
The proposals by the chief fire officer, as part of what he called a "zero-based fire cover review", in September 1995 are unacceptable to people in my constituency, and reduce fire cover to an unacceptable level. It is proposed to close the retained station at Bewdley, and to halve the full-time complement at Kidderminster, reduce the number of its appliances and remove its hydraulic platform.
That has caused a huge amount of controversy. We have received a petition of 25,000 signatures against the proposals. The Wyre Forest district council has a special working party to act against them. The proposals have been the subject of innumerable meetings and letters to me and to Hereford and Worcester county council. I hope that, even at this late stage, the people responsible in the fire authority will review their proposals, which are unacceptable.
I understand that the county council has set up a working party, which is due to report by the end of January 1996. Although, under the Fire Services Act 1947, the proposals must ultimately go to the Home Office for approval, I hope that those proposals will be withdrawn before that becomes necessary.
Although much has been said about the financial background to that matter, I do not believe that the financial background is the principal cause of the proposals about which so many fears have been expressed. Indeed, several councillors have said that, even were they able to spend more money on the fire service, it would continue to be intent on those wrong-headed proposals. Nevertheless, I should say one or two things about the background to the financial position of the fire service in Hereford and Worcester.
Hereford and Worcester is bottom of all shire counties in its standard spending assessment per head allocation for fire—about £16.80 per head, by contrast with an average for the shires, let alone the metropolitan areas, of about £20.55. That effectively means that, instead of the county being able to spend about £14 million a year—which is what is actually spent, because the county council spends money in addition to the allocated SSA—which would have been the case had Hereford and Worcester been given an SSA at the county average, only £11.5 million is spent related to the SSA.

Mr. Michael Spicer: I am grateful to my hon. Friend for giving way in an excellent speech, in which he makes an important argument on behalf of his part of the county. I am the Member of Parliament for the other part of the county, which is covered by the same fire service, which, as my hon. Friend knows, was enormously stretched this summer in, among other things, putting out those enormous fires on the Malvern hills.
I have a problem similar to that of my hon. Friend. The fire service is starting to speak about closing Pebworth fire station in the same way as the Bewdley fire station in my hon. Friend's constituency. In the context of what my hon. Friend is saying, I wanted to ask him about funding.
Is it not peculiar—I have previously drawn this matter to the attention of the Minister—that the way in which fire services must spend their money is calculated on the basis of risk analysis, but the money that is made available for them is calculated on the basis of historic spend? There is a mismatch between the budgeting process and the funding process. Is that not at the back of my hon. Friend's argument?

Mr. Coombs: My hon. Friend is absolutely right. To give an idea of the scale of the problem we have, not only is there a gap of 21 per cent. between the shire average SSA and the Hereford and Worcester SAA, but that gap has grown historically. Even if the plan is implemented by the chief fire officer, the gap will increase to about 30 per cent.
I know that Baroness Blatch has spoken to members of Hereford and Worcester county council about that matter. I know that the Government are reviewing the area cost adjustment, which militates against counties in our region. I also know that the Government, with the Department of the Environment, are reviewing the mechanism by which the fire service SSA is calculated.
I am worried that the Hereford and Worcester county council fire brigade appeared not to know what the nine options were that had been laid down in that working party for the review of the SSA. However, as my hon. Friend the Member for South Worcestershire (Mr. Spicer) says, there is a significant difference between the options.
For instance, option 1, which, on fire safety, would give greater credence to the number of premises and plans that were covered by the fire service and, on fire prevention, would give greater credence to the number of pupils in schools, would mean that an SSA settlement for Hereford and Worcester would be increased by 23 per cent. on 1995–96 figures, or by £2.7 million, which would reflect current spending in the way we require.
There is a strong case for, not an activity-based approach, but a fire station-based approach, based on the number of homes and the sparsity of population in much of the area. I urge Ministers to get on with considering such a redistribution of resources. I hope that we shall hear something good when we hear the local government finance settlement, which we expect tomorrow.
It is an irony that the proposals, far from saving money, will cost about £340,000 to implement and £240,000 a year from then on. They involve the redundancy of 28 whole-time personnel from Kidderminster—half the whole-time personnel—the removal of a whole-time pumping appliance and the hydraulic platform there, and the closure of the Bewdley retained station, in a way that has caused uproar.
Those proposals are wrong-headed for several reasons. First, they are a perverse redistribution of resources, even within the county. Kidderminster, which, in the period July to September 1995, had 762 turn-outs, will be downgraded, whereas Bromsgrove, which had only 427, will be upgraded to the same level as Kidderminster, in spite of the fact that it had only slightly more than half the number of calls. With the closure of Bewdley,

Kidderminster, even on a downgraded basis, will now be expected, with half the whole-time personnel, to cover an area not of 50 square miles, as hitherto, but of 90 square miles.
The boundaries set within Bewdley between those areas that are designated C in the review and those that are designated as lower-risk D areas lack all logic, owing more to the squares of the Ordnance Survey map than to any idea of the community and the physical geography. The Lakes residential estate is regarded as a C risk area, whereas St. Anne's middle and first schools, where there are a great many vulnerable young people right next to the Lakes industrial estate, are regarded as being in a D area.
The fact that Kidderminster has been downgraded from B to C status does not reflect the very many small factories, many with chemical and electrical processes, in the town. The matter has been drawn to my attention by firefighters in the area.
Moreover, the proposals completely ignore the historic nature of Bewdley, the proximity and complicated nature of its buildings, the high proportion of elderly people in its population, and the presence of tourist attractions such as the Severn valley railway and the safari park, which not only increase the risk of fire but make access difficult, particularly during the rush hours and at tourist peak times.
I shall concentrate on two specific problems. The first relates to response times. If a fire service is to be credible, its fire engines must be able to reach a fire within the time laid down. The centre of Bewdley is designated a C area, which means—according to Home Office recommendations—that one fire engine must reach a fire in between eight and 10 minutes. If the proposals are implemented, that fire engine will have to come from Kidderminster.
In a letter dated 11 September, the chief fire officer told me that that could be done in eight minutes. On 19 September, he elaborated on that, saying that it could be done
at a speed of no more than 30 mph, with no lights or two-tone alarms, obeying traffic regulations and in a rush hour.
His deputy took the same line, saying that trials had been carried out showing that the journey could be done in eight minutes and 45 seconds. Most people, including firefighters, do not believe that; although the distance is only about three miles, they do not see how it could be achieved.
I have discovered the answer, however. Apparently, the calculation is done on the basis that the clock stops when the vehicle is stationary. It will not be of much comfort to someone in a fire to be told, "We can get to you in eight to 10 minutes, provided that our fire engine is moving all the time." If the vehicle is held up by traffic lights or a traffic jam, the period could be much longer, and lives could be put at risk. That, I feel, reveals the absurdity of the fire officer's argument that response times will be acceptable.
It is suggested that, in the event of a fire in, for example, a block of flats, a hydraulic platform can be transported from Bromsgrove to Kidderminster—a distance of at least six miles—within that period of eight to 10 minutes. According to Mr. R. E. Smith of Kidderminster, who drives that hydraulic platform,
If he thinks the hydraulic platform can provide adequate cover from Bromsgrove"—


"he" being the chief fire officer—
he is wrong. I drive the appliance. He doesn't. I doubt if Mr. O'Dwyer has even the slightest idea how long it would take an appliance such as the hydraulic platform to get from Bromsgrove to Kidderminster.
He is sure that it would not be possible to take the platform to the scene of the fire within the required time, particularly during rush hours.
My second point relates to the cost of fire cover. If the full-time team of firemen in Kidderminster and their pumping appliance are to go—and, according to best practice, there should be two appliances for each fire, so that back-up is available—retained crews will have to be called out for every fire. It has been estimated by the Fire Brigades Union that turn-outs by retained firefighters would increase by no less than 398 per cent. in my area.
First, that is likely to increase costs, which should be allowed for in the review. Secondly, it will affect recruitment. As a firefighter asked in a letter to me, what employers will allow their fire officers to have four times as much time off as they had before? Thirdly, because retained firefighters cannot reach a fire as quickly as non-retained full-time firefighters, the speed of attack and the effectiveness of firefighting will be reduced.
I am also concerned about the way in which the fire brigade, the fire authority and the county council have consulted on these controversial proposals. This is not the first time that such consultation has taken place; in 1988, 1993 and 1994, the townspeople of Bewdley—with my support—repelled attempts to close their fire station. Although the circumstances of the town were exactly the same then as they are now, special circumstances of the kind that I have outlined were identified by professional officers on the fire review team, and it was decided that the station should remain open.
The same circumstances obtain today. Indeed, the original fire cover review report—produced by three senior officers and others for the chief fire officer earlier this year—specifically states that, although in statistical terms there may well be a case for closing the Bewdley fire station, as there has been on all the previous occasions,
Having paid due regard to these influences, it is our professional opinion that the fire station at Bewdley is maintained as at present.
The town is of historic importance, and many of the properties are of architectural value. The attractive riverside properties provide a backdrop to a thriving community reliant upon the tourist industry.
The report refers to the River Severn and the safari park, which attract hundreds of thousands of visitors each year—people who contribute significantly to the county's economy. It adds:
The hotels, restaurants, shops, guest houses and leisure facilities that line the narrow streets of Bewdley present a substantial fire risk and the potential for rapid fire spread with dire consequences is ever present. It is for these reasons that we cannot recommend the closure of Bewdley fire station.
That is said every time the closure is proposed. It was said this year, and completely ignored by the chief fire officer.
I understand that the document was given anonymously to the chairman of the Wyre Forest working group which is studying the proposals. He—Councillor John Gordon—openly gave it to the chairman of the county council's fire

services committee, who photocopied it and gave it back to him. At 4 o'clock on 27 November, the police raided the home of this gentleman, who was doing his best to help the people of Bewdley to retain their fire service, saying that they were dealing with the theft of a document.
Initially, the chief fire officer denied any knowledge of the document. Then his deputy said, "Okay, it does exist, but only minor grammatical changes have been made." In fact, the main thrust of the proposals had been completely changed. The first version said, "Do not close Bewdley fire station"; the second said, "We are going to close it."
On 30 October, the Home Office—in the person of Baroness Blatch—wrote to me saying that the Home Office would give permission for changes to the fire service only
when representations have been considered by the authority.
The authority appears to be ignoring even the advice of its own professional officers, a group that it set up specifically to examine the fire cover review. I do not believe that it can be proved that the consultation exercise has been carried out thoroughly, and I hope that that will weigh heavily with Ministers if these wrong-headed plans are ever submitted to them. Even at this late stage, I sincerely hope that they will not.
I ask the Government to review the SSA allocations for fire cover, and the way in which the area cost adjustment is calculated. If the county council rejects the proposals and reduces fire cover in the Wyre Forest area, saying that it is unnecessary and expensive, without a jot of popular support, that would be potentially dangerous.

The Parliamentary Under-Secretary of State for the Home Department (Mr. Timothy Kirkhope): I congratulate my hon. Friend the Member for Wyre Forest (Mr. Coombs) on securing this debate on the fire service in Worcestershire. May I also welcome to the debate today my hon. Friend the Member for South Worcestershire (Mr. Spicer), who I know is most interested in these matters?
The Government have a high regard for the fire service, a regard that is shared by the general public. In its report on the fire service earlier this year, entitled "In the line of fire", the Audit Commission stated that the fire service can be proud of its record in responding to incidents, that it has high levels of skill and professionalism, is staffed by able managers and courageous front-line staff, and is held in great esteem by both the general public and individuals who have needed its assistance.
I whole-heartedly endorse the commission's comments and, indeed, have a personal reason for being pleased to be here today: my late father was a member of the well-known National Fire Service at the beginning of the war. The photographs in our family album show him with rather more primitive equipment than is at present deployed by the fire services of this country, but nevertheless those photographs give my family a great amount of pride.
One of my earliest memories is of being taken to Newcastle's Pilgrim street fire station by my father and being allowed to descend the pole—not the greasy pole of politics—and to see the firemen polishing the bells on


their fire engines. I do not know whether they still do that in my hon. Friend's constituency, but it is a matter of great pride to me that I have those early recollections.
My hon. Friend referred to Government funding of the fire service, and to SSAs. There are two underlying issues in relation to fire service funding: whether the total public expenditure provision for local government is sufficient; and, given that total, how we distribute it in terms of SSAs among the local authorities.
The total provision has to be broadly consistent with our restraint on public expenditure as a whole. I am sure that my hon. Friend is aware of that need. The Government concluded that, for 1995–96, local authorities as a whole should have an increase of 0.8 per cent. when compared on a like-for-like basis with 1994–95.
That is not as much as many would have liked, but in our view the settlement for 1995–96 was realistic in the current economic climate, in the context of low inflation and the requirement that pay increases in the public sector should be met from increased efficiency. It reflected a balanced and reasoned judgment on the understandable desire for more local authority expenditure and on what the country can afford.
My right hon. Friend the Secretary of State for the Environment, as my hon. Friend has mentioned, will be making an announcement tomorrow on the provisional local government finance settlement for 1996–97. My hon. Friend referred to the distribution formula for the fire service element of SSAs. We have indeed been looking, with the Department of the Environment and local authority associations, at the formula for 1996–97, taking account of matters such as pensions, fire safety and other factors that the associations wish to raise.

Mr. Michael Spicer: Does fire safety include the concept of fire risk, which is at the root of the budgeting arrangements in which the fire services have to engage?

Mr. Kirkhope: My hon. Friend has raised that matter with me once before, and I undertook then to look at it. I am still doing so, and understand that it is a possible area to be considered.
It is important to remember that a shire county is not limited in its spending on its fire brigade by the fire service share of its SSA. What matters is the overall SSA for the county council. It is for the county council to decide its priorities for spending across all its services, bearing in mind its statutory and other responsibilities.
Before I refer specifically to the fire service in north Worcestershire, it would be helpful if I explained the framework within which decisions about fire cover are taken. It is important to remember that the fire service is a local authority service—it has been since the Fire Services Act 1947 transferred firefighting functions from the wartime National Fire Service, to which I have already referred.
Statutory responsibility for providing an effective and efficient fire service to meet all normal requirements rests with the local fire authority. It is for the fire authority—Hereford and Worcester county council, in this case—to decide how much of its overall budget to spend on its fire service to comply with its statutory responsibilities.
As to the Government's role, my right hon. and learned Friend the Home Secretary has various duties under the Act. He monitors performance through Her Majesty's

inspectorate of fire services, and is responsible for promoting high and consistent standards in such matters as training, equipment, promotion and recruitment. As my hon. Friend the Member for Wyre Forest said, under section 19 of the Act, my right hon. and learned Friend is also required to be notified of the fire authority's establishment—the number of its fire stations, fire appliances and firefighting posts—as at 1 January each year. Of particular relevance to the debate is the fact that the fire authority may not reduce its establishment, although it can increase it, without my right hon. and learned Friend's consent.
My right hon. and learned Friend has a specific and limited role in considering applications under section 19. He grants approval where the following conditions are satisfied. First, the proposals must have been sufficiently widely publicised, in sufficient detail and with adequate time, to enable any interested party to make representations; my hon. Friend referred to the question of consultation and representations. Secondly, the representations must have been considered by the fire authority; thirdly, after taking advice from Her Majesty's inspectorate of fire services, my right hon. and learned Friend must be satisfied that the nationally recommended standards of fire cover will be maintained.
I must emphasise that it is not the role of my right hon. and learned Friend to decide whether the proposals that a fire authority makes represent the best arrangements for fire cover. Her Majesty's inspectorate of fire services is available to advise the authority on that matter. Ultimately, however, responsibility rests with the fire authority, which is accountable in law for the service that its provides.
The 1947 Act does not define the test of an effective and efficient fire service, which a fire authority must provide to meet normal requirements for fire cover. But it is long-standing practice to interpret that by reference to the nationally recommended minimum standards of fire cover. The standards are not just nationally recommended; they are nationally agreed in the Central Fire Brigades Advisory Council, which was established by the 1947 Act and on which the relevant fire service organisations are represented. They were also reviewed by the Joint Committee on Standards of Fire Cover in 1985 for the Central Fire Brigades Advisory Councils for England and_ Wales and for Scotland. The standards enable all concerned to know where they stand as regards the minimum level of service that they should be delivering.
The Audit Commission's report called for greater local flexibility in the application of the fire cover standards. It did not say precisely how the standards should be changed, and recognised that no change should be considered without careful research. The issue is being considered by the Central Fire Brigades Advisory Council, but it is a complex matter, on which much work will be needed.
Following the 1985 review of standards, all fire authorities in Great Britain reviewed their risk categorisation and the resources necessary to comply with the nationally recommended minimum standards. I am aware that an extensive review of fire cover was completed by the Hereford and Worcester brigade, and the results were circulated recently for public comment. I understand that the recommendations of the review could, if implemented, have significant implications for fire


cover in my hon. Friend's constituency and elsewhere, and that they include proposals to close the fire station at Bewdley and to remove a pumping appliance that is staffed by full-time firefighters, and a hydraulic platform from Kidderminster.
The implementation of those recommendations, which involve a reduction of fire cover, would, as I have explained, require an application under section 19 of the 1947 Act for my right hon. and learned Friend's approval. It is a matter for the county council to consider what action it proposes to take in respect of that review, in the light of the representations that it has received and advice from Her Majesty's inspectorate of fire services. I hope that this will also take account of my hon. Friend's references to various other factors, such as response times, the interesting timing system and the earlier report surrounding the circumstances of Bewdley fire station.
My right hon. and learned Friend has already received a number of representations—including, of course, one from my hon. Friend, about the fire cover review. I can assure my hon. Friend that, should the county council make application to reduce fire cover in any part of the county, my right hon. and learned Friend will take those representations into account in reaching his decisions. I am sure that the county council will wish to give careful consideration to the points that my hon. Friend has made today.
It being half-past Eleven o'clock, the motion for the Adjournment of the House lapsed, without Question put, pursuant to Order [20 November].

PRIVATE BUSINESS

SELECTION

Ordered,

That Mr. Ray Powell be discharged from the Committee of Selection and Mr. George Mudie be added to the Committee.—[Mr. Conway.]

Oral Answers to Questions — FOREIGN AND COMMONWEALTH AFFAIRS

Gibraltar

Mr. Garnier: To ask the Secretary of State for Foreign and Commonwealth Affairs when he last visited Gibraltar to discuss United Kingdom-Gibraltar relations. [850]

The Minister of State, Foreign and Commonwealth Office (Mr. David Davis): I visited Gibraltar on 7 and 8 November this year and had a range of discussions with Gibraltarians.

Mr. Garnier: I congratulate my hon. Friend on his recent visit to Gibraltar which was, by all accounts, a most successful visit. Is my hon. Friend aware that drug smuggling and tobacco smuggling through Gibraltar have decreased drastically over the past six months? Can my hon. Friend give any reasons for the dramatic fall in those illegal trades?

Mr. Davis: I thank my hon. and learned Friend for his flattering commendations. The reason for the fall in those trades is that Government action has closed them down. One of the most notable outcomes of my visit to Gibraltar was hearing about the fact that 8,000 Gibraltarians turned out on the streets of Gibraltar to support the Government's action in closing down those criminal activities. In my judgment, that shows very strong support for the Government's actions in a community of just 30,000 people.

Dr. Marek: Will the Minister give an absolute assurance that Gibraltar is within the European Union and that, for every circumstance, the boundary of the European Union runs around Europa point and not across La Linea?

Mr. Davis: The hon. Gentleman is quite right. Gibraltar is within the European Union, but of course for some purposes, particularly free movement of goods, it falls outside the customs boundary. I think that is the point that the hon. Gentleman is seeking to make.

Mr. John D. Taylor: In view of the improvement that the Minister has stated in relation to criminal activity in Gibraltar, what progress has been made in easing access between Spain and Gibraltar?

Mr. Davis: Some progress has been made. Over the few weeks after that reduction in criminal activity, there was a 70 per cent. increase in the throughput of people coming into Gibraltar across the border. That amounts to some 70,000 people coming into a community of some 30,000 and was a material improvement. We have maintained our pressure on the Spanish Government because the delays are still too long, and we wish them to improve further.

Nigeria

Mr. Mark Robinson: To ask the Secretary of State for Foreign and Commonwealth Affairs what representations he has made to the Government of Nigeria concerning human rights in that country. [851]

The Secretary of State for Foreign and Commonwealth Affairs (Mr. Malcolm Rifkind): We support the unprecedented decision of the Commonwealth Heads of Government meeting in Auckland to suspend Nigeria's membership. We also agreed with our European Union partners on 20 November a range of additional measures to mark our concern.

Mr. Robinson: The abuse of human rights in Nigeria has gone on far too long. Does my right hon. and learned Friend agree with me that the Harare declaration, which the Prime Minister pioneered two years ago, has been most important in bringing the Commonwealth states together in their condemnation of the regime in Nigeria?

Mr. Rifkind: My hon. Friend is correct. The Harare declaration was important in itself. However, the suspension of Nigeria for human rights reasons emphasises that the declaration was not simply a form of rhetoric but that it led to significant action.

Mr. Robin Cook: Can the Secretary of State confirm that, in June this year, the Government gave a licence for the export of CS gas and rubber bullets to Nigeria? If he feels unable to confirm any individual sale, can he at least confirm that such products can no longer be exported under the new terms of the arms embargo? Does he agree that the most comprehensive arms embargo would be to cut off the cash flow from oil to the Nigerian military? At Monday's meeting of the Council of Ministers, will he support the German and Swedish proposal for an examination of the impact of oil sanctions on the Nigerian Government?

Mr. Rifkind: On the hon. Gentleman's first point, I cannot comment on a specific licence application, but I can certainly confirm that, as a result of the total arms embargo now imposed, no weapons of any kind can be provided to the Nigerians so long as that embargo continues. We have not excluded the possibility of oil sanctions. It is important for the hon. Gentleman to remember that the major importer of Nigerian oil—40 or 50 per cent.—is the United States. It is therefore important to see whether there is a likelihood of unanimity for such an imposition in the Security Council. We have not ruled it out. It deserves further consideration.

Arms Exports (Iraq)

Mr. Ronnie Campbell: To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the Government's policy on arms exports to Iraq. [853]

The Minister of State, Foreign and Commonwealth Office (Mr. Jeremy Hanley): We comply with United Nations Security Council resolution 661, which prevents the sale to Iraq of any weapons or other military equipment. In 1984 we introduced guidelines forbidding the export of lethal equipment, which were much tougher than those of any other major defence exporters. After 1984 the UK accounted for less than 3 per cent. of Iraq's defence-related imports.

Mr. Campbell: Does the Minister agree that, now that Scott is due to report his findings, if any Ministers are found to be to blame for, or involved in, that gun run, they should resign?

Mr. Hanley: The hon. Gentleman is right. The United Kingdom's policy on arms exports to Iraq from 1984 to


1992 is being considered by Sir Richard Scott. We shall take careful note of any conclusions and recommendations in Sir Richard's report, but we have no intention of commenting on the report until it is published.

EU Intergovernmental Conference

Mr. Betts: To ask the Secretary of State for Foreign and Commonwealth Affairs if he intends to publish a White Paper outlining Her Majesty's Government's priorities for the 1996 intergovernmental conference of the European Union. [854]

Mr. Rifkind: This is still under consideration.

Mr. Betts: If there is to be no White Paper—we have had no guarantee today—will the Secretary of State explain how the House is to hold Ministers accountable until the negotiations begin? Is the Foreign Secretary effectively saying that he cannot produce a White Paper because to produce anything at all would split the Conservative party down the middle? Will not the interests of the British people and the House have to take second place to the interests of the fragile unity within the Conservative party?

Mr. Rifkind: The hon. Gentleman's comments are pretty absurd. Tomorrow, I shall give evidence to the Select Committee on Foreign Affairs precisely on the intergovernmental conference and our policy with regard to it. So there are many opportunities, which have been used in the past and will continue to be available, to ensure that the House is kept informed. We have not excluded the possibility of a White Paper, but I regard that as one of a number of ways of ensuring that the House is fully informed and able to contribute to our deliberations.

Mr. Fabricant: Will my right hon. and learned Friend confirm that, if he were to publish a White Paper, one thing that he would not say is that we would give up our regional, environmental, social and industrial privileges—our veto? Does he agree that any thought of giving up our veto would have a damaging effect on jobs? Is he as amazed as I am that the Labour party is suggesting just that?

Mr. Rifkind: Labour Members are suggesting that, and have committed themselves to it. Curiously, however, the Leader of the Opposition omitted to mention that point in his speech to the Confederation of British Industry on the social chapter. If he wanted to win industry to the Labour party's point of view, he could at least have come clean about the Labour party's current policy, which would make the social chapter subject to qualified majority voting.

Mr. Robin Cook: Can the Foreign Secretary confirm that Britain is alone among the countries of Europe in resisting a common policy on racism as part of the revision of the treaty? We have the largest ethnic minority population in Europe. Why do the British Government oppose measures that would protect members of our ethnic minority population from discrimination when they travel in Europe? Does the right hon. and learned Gentleman not understand that, by opposing a European commitment against racism, the Government are opposing the interest of British residents and damaging Britain's standing among our European partners? Is that not just

another case in which the Government are sacrificing British interests and British influence to please the right wing of the Conservative party?

Mr. Rifkind: That simply is not true. As the hon. Gentleman well knows, this country has the most effective race relations legislation in western Europe. There is no qualification with regard to our commitment to eradicating racism in all its forms. The Home Secretary made it clear not that he was opposed to ensuring the eradication of racism but that this is a genuine and open discussion on the best way to achieve that objective.

United Nations

Mrs. Ann Winterton: To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the future of the United Nations. [855]

Mr. Rifkind: The United Nations will remain the principal mechanism for the resolution of threats to international peace and security, and the forum for addressing a wide range of global problems.

Mrs. Winterton: Does my right hon. and learned Friend agree that NATO has been much more effective than the shambolic United Nations in the former Yugoslavia? Does he also agree that if the UN is to play any meaningful role in the world in future it must undergo a fundamental root-and-branch reform as a matter of urgency?

Mr. Rifkind: NATO, of course, has operated in Bosnia at the request of the United Nations because the UN does not have the kind of military capability that is available to the Atlantic alliance. I agree that the United Nations financial arrangements need to be reformed. There is much waste and extravagance and the UN must be funded in a form that ensures that member states do not fall into arrears, because that has been undermining the UN's capacity to carry out its proper role.

Mr. Menzies Campbell: I am sure that, like others, the Secretary of State was much encouraged by the vigorous rejection of isolationism by President Clinton this morning. Does the right hon. and learned Gentleman agree that the future effectiveness of the United Nations will depend on the whole-hearted commitment of the United States to that organisation? Will he take every opportunity to press that point on his counterpart in the American Government?

Mr. Rifkind: The United States Government, and President Clinton in particular, need no such reminding. The problem with United Nations funding in respect of the US contribution arises because of the behaviour of Congress, which up to now has declined to authorise the appropriate funding despite the urging of the Administration. That is where representations and pressure need to be directed.

Mr. Churchill: Does my right hon. and learned Friend agree that the effectiveness of the United Nations depends more on the United States' active involvement than on that of any other Government? Will he warmly congratulate the President of the United States on his fine address today to both Houses of Parliament in the Palace of Westminster? Above all, will my right hon. and learned Friend congratulate him on his categorical condemnation


of the forces of appeasement and isolationism, and wish him well in his battle with those elements in Congress that support such policies?

Mr. Rifkind: I unreservedly pay tribute to President Clinton for his fine address this morning. The United States and the United Kingdom work well together and enable the great democratic forces to be as successful as they have been in recent times. The way in which the President emphasised the close bonds between the United States and the United Kingdom was very much in tune with the way that this country sees the transatlantic alliance.

Mr. Tony Lloyd: The Foreign Secretary has gone some way towards dispelling the myths of the isolationists on both sides of the Atlantic. Is he prepared to pay tribute to the quiet work of the United Nations through, for example, UNICEF and the United Nations High Commissioner for Refugees? Those organisations have carried out valuable work over many years. Are the cuts in funding to United Nations agencies which were announced in yesterday's Budget in the interests of today's rhetoric by the Foreign Secretary?

Mr. Rifkind: Of course I pay tribute to the work done by UNICEF and the United Nations High Commissioner for Refugees. The hon. Gentleman mentioned reductions that were announced yesterday. Most of them are possible because of the reduction in the forecast of what our contributions to the various multilateral organisations ought to be; therefore, I do not think that the programmes to which he refers will suffer in any way as a result of the announcements.

Iraq

Mr. Robathan: To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the situation in Iraq. [857]

Mr. Hanley: The situation in Iraq remains poor for ordinary people. This is the direct result of the regime's failure to implement UN resolution 986, which would permit the sale of oil in return for humanitarian goods, or to meet its other UN obligations.

Mr. Robathan: The House will note that this matter is to be discussed in an Adjournment debate later today. Has Iraq the ability to be a prosperous country and has it good natural resources? How much is the present regime spending on armaments and internal repression? Will my right hon. Friend confirm that there will be no move by the Government to relax sanctions because, far from encouraging democracy, liberty or prosperity in Iraq, that would be an endorsement of Saddam Hussein's evil regime?

Mr. Hanley: I am grateful to my hon. Friend for his question because it helps to expose the true nature of the Iraqi regime. It is within Saddam Hussein's power to sell up to $1 billion-worth of oil every three months to provide humanitarian aid and medical supplies for his people. The relaxation of the import embargo depends on Saddam's complying with all relevant resolutions, but many matters remain cause for concern: Kuwaiti detainees, who are still unaccounted for; the human rights record, which is appalling; the internal economic blockade on Kurds and Shi'as; the mutilation of army deserters. Iraq is also

involved in state-sponsored terrorism and has failed to account for more than 600 missing Kuwaiti and third-country nationals.

Mr. Dalyell: The Minister's description of the situation being "poor for ordinary people" just does not do justice to the appalling nature of the position. The Foreign Office has a full briefing of my visit to the children's hospital in Baghdad—two years ago, admittedly—when I saw rows of infants expiring, and the same was found at Um-Kasr. In its preparation for tonight's Adjournment debate on sanctions on Iraq, will the Foreign Office at least read carefully the letter that the Foreign Secretary has had from a much more recent visitor, Riad El-Taher, in which he describes the position and outlines Iraq's difficulty in complying with a United Nations resolution that is impossible for the people to accept, regardless of whether they support Saddam?

Mr. Hanley: The hon. Gentleman's views on Iraq, on Saddam Hussein and on his regime are known to the House and, no doubt, we will hear more of them tonight. All I can say, however, is that we are conscious of the suffering of ordinary people in Iraq. Saddam, not the UN, is responsible for that suffering. Food and medicines are not subject to sanctions and, therefore, we ask again for Saddam Hussein to adopt United Nations resolution 986 and to allow Iraq to export some oil in return for humanitarian goods. He can do so. It is not impossible for him to do so. He could receive at least $2.5 billion net in the next 12 months, after charges for the resolution. He does not do so. I urge the hon. Gentleman to spend some of his time urging Saddam to help his people.

French Nuclear Tests

Mr. Hall: To ask the Secretary of State for Foreign and Commonwealth Affairs what representations Her Majesty's Government received on nuclear testing by France during the recent Commonwealth summit in New Zealand. [858]

Mr. Rifkind: The Government not only received but made representations during the recent Commonwealth summit.

Mr. Hall: What vital national interest is served by the Government's change in policy from not condemning the French nuclear tests to supporting them? Given the Foreign Secretary's warm welcome of President Clinton's address this morning, how did French nuclear tests help to lift the nuclear cloud that threatens our children's bright future?

Mr. Rifkind: If the hon. Gentleman represented a party that had genuinely changed its view on nuclear weapons, he would understand that all the nuclear powers are committed to working towards a comprehensive test ban treaty, but it is not unreasonable to be sympathetic to the problems faced by our French allies as they bring their testing procedure to a conclusion. As in nuclear power, we understand that these are complex and sensitive issues, and we will not run to criticise a good ally that is committed to a comprehensive test ban treaty but believes that this is a necessary prelude to the completion of negotiations.

Sir Peter Emery: Will my right hon. and learned Friend emphasise yet again that the commitment of the


French to signing the nuclear test ban treaty in the spring is of the greatest importance and needs to be emphasised absolutely for the people who are critical of it?

Mr. Rifkind: That is the strategic objective. It is likely that the French nuclear tests will be finished in a couple of months from now and then the concentration will be on the global negotiations, to which France is as committed as any other country. It is difficult to understand why the Labour party seems to relish attacking a nuclear power when it simultaneously tries to persuade the British public that it supports the British nuclear deterrent.

Mr. Jack Thompson: The Foreign Secretary will be aware that, in July this year, the Organisation for Security and Co-operation in Europe met in Toronto. One of the topics that was debated was French nuclear testing. He will also be aware that the only people who voted against the resolution to condemn the nuclear testing were the French, obviously, and the British Conservatives. Does he believe that the British Conservatives and the French are the only ones who are in step and that the rest of the world is out of step?

Mr. Rifkind: I believe that it is the British Government's responsibility to come to a decision that is consistent with our national interest, not simply to join a pack hounding a good friend and ally regardless of our own beliefs on the issues at stake.

European Political Union

Sir David Knox: To ask the Secretary of State for Foreign and Commonwealth Affairs when he next expects to meet his counterparts in the European Union to discuss greater political union. [859]

Mr. David Davis: My right hon. and learned Friend and I regularly meet our counterparts in the European Union at the Foreign Affairs Council. The next meeting will be held in Brussels on 4 and 5 December.

Sir David Knox: Does my hon. Friend agree that the closer the co-operation within the European Union, the greater the influence that Britain can exert in international affairs?

Mr. Davis: The Government's perspective on the European Union is that we intend to improve it by increasing prosperity and competitiveness, enhancing internal and external security, making enlargement possible and rebuilding popular support. We get support from all our allies in connection with all those factors.

Mr. MacShane: Does the Minister accept that reform of the common agricultural policy, on which we now spend about £3 billion—£60 for every man, woman and child in the country—can be achieved only through co-operation with political allies in Europe and by asking them to drop the veto in that area, so that Europe can move forward on that front, especially in allowing the entry of the east European nations, which will not be able to enter Europe if the CAP is maintained in its present form?

Mr. Davis: The hon. Gentleman is surprisingly ill informed. The great majority of common agricultural policies are already decided by qualified majority voting. He is simply trying to cover up his party's willingness to give up the veto on Britain's behalf.

Mr. Cash: Does my hon. Friend agree that it is not enough simply to talk about co-operation, or about allies?

Does not political union really mean a legal framework within the rule of law, which—through majority voting, and in line with the arrangements promoted by 12, if not 14, of the other member states—would impose a state of affairs in which the British people would no longer be able to conduct their sovereign Parliament or make their own choices in general elections? Does he agree that we cannot contemplate that prospect, that we shall not do so at the intergovernmental conference and that we shall not give in to the pressures from Germany and elsewhere? Do we not need a White Paper to set out the British Government's position well in advance, so that the other countries know exactly where we stand, and we can explain our position to the British people?

Mr. Davis: There is no doubt whatever about the British Government's position on qualified majority voting. I have made it clear, as has my right hon. and learned Friend, many times both at the Dispatch Box and to several Select Committees. It is clearly the case, and will remain the case, that decisions at the IGC are made by consensus, not by majority voting. So long as that applies—it will apply so long as we have any say in the matter—we shall stick to our guns on that subject.

Mr. Spearing: With regard to the future of the political union that already exists, has the Minister noticed the section in the reflections group's first report about the place of national Parliaments? In particular, has he noticed paragraph 107, which mentions notice to national Parliaments of documents presented to the Council of Ministers—including those in the home and justice pillar, which of course do not come under our present scrutiny procedure? Does he agree that the suggested period of four weeks would have avoided the recent difficulties over the Home Affairs Council, and the document that the Commission presented there?

Mr. Davis: I cannot comment immediately on the Home Affairs Council but, as I think the hon. Gentleman already knows, in the reflections group I have argued in favour of the Scrutiny Committee's comments on the declaration 13 position that he described.

Mr. Dykes: As greater political union presumably means sovereign countries working closer and closer together in agreed integrated structures, including some majority voting, on which we robustly insisted for the single market, why is that so dangerous? Could the Government not occasionally say that it is a good idea?

Mr. Davis: My hon. Friend is right in one respect; we supported qualified majority voting for areas in which we thought it would be useful in removing protectionism and protectionist tendencies within the European Union. That has promoted one of our country's greatest successes in Europe—the development of the single market.

Public Interest Immunity Certificates

Mr. Jamieson: To ask the Secretary of State for Foreign and Commonwealth Affairs how many public interest immunity certificates have been signed by Foreign Office Ministers since 1990. [860]

Mr. Rifkind: Seven.

Mr. Jamieson: Will the Secretary of State assure the House that he and his Department will not be following


the example set by his colleagues in the original Ordtech directors' trial, in which the right hon. Members for St. Albans (Mr. Lilley) and for Mole Valley (Mr. Baker) signed public interest immunity certificates to prevent information from landing in the hands of the directors' defence counsel, simply because, in the weeks leading up to the 1992 general election, that information would have proved at very best that the Government were turning a blind eye to the re-arming of Saddam Hussein?

Mr. Rifkind: The hon. Gentleman is talking complete rubbish. As he well knows, public interest immunity certificates have existed for many years. Ministers do not have the last word on whether the documents covered by such certificates should be made available in a criminal trial. It is for the judge to decide, having taken into account the balance of public interest. That is the right and proper approach.

BBC World Service

Mr. Dowd: To ask the Secretary of State for Foreign and Commonwealth Affairs what action he proposes to take following the publication of the National Audit Office report on the BBC World Service. [861]

Mr. Donald Anderson: To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the future of the BBC World Service. [865]

Mr. Rifkind: I welcome the National Audit Office recommendations, which will lead to improved efficiency. The Government have a strong record of support for the World Service. Funding is up by 50 per cent. in real terms since 1980. The reductions announced yesterday apply to its capital allocation, and there is virtually no change in the amount of resources provided to cover its operating costs.

Mr. Dowd: Is the Secretary of State aware that the NAO praised the World Service for its improvements in management and performance since 1992? Such improvements are made more difficult by what he omitted to mention in his answer—the operating cash level has been frozen. Therefore, there will be real terms reductions in World Service funding, coupled with the 20 per cent. reduction in capital allocation which was announced yesterday. Does he not realise that a great British asset, which enjoys support throughout the House, is being undermined by demented Treasury accountants? When will his Department more robustly defend this valuable British institution?

Mr. Rifkind: I have paid no lip service to the BBC World Service. It is a superb service that quite rightly draws support from both sides of the House. I would never do anything to damage the ability of the BBC World Service to remain the premier service of its kind anywhere in the world. The reductions announced yesterday were almost exclusively with regard to capital allocation and were part of a wider Government policy to encourage the financing of capital expenditure through the private finance initiative.
The hon. Gentleman might like to know that the managing director of the BBC World Service said:
We are already looking positively as to how the Private Finance Initiative can be applied to our capital plans and I am hopeful that we can make significant progress".
The hon. Gentleman should bear that in mind and cheer up.

Mr. Anderson: Does the Foreign Secretary recall with shame the grave damage done to our national interests overseas in the early 1980s by the slashing of British Council and overseas service budgets? With the 20 per cent. cut in capital expenditure, only a hope that the private sector will make up the shortfall, and with no provision for the knock-on effects of leasing on the capital budget, are we not in danger of repeating that historic mistake?

Mr. Rifkind: The hon. Gentleman should reflect on the fact that, since 1980, funding for the BBC World Service in real terms—not just in cash terms—is up by 50 per cent. When the hon. Gentleman criticises what the Government announced yesterday, he might bear it in mind that the chairman of the BBC said:
We accept that it cannot be seen in isolation from the totality of the Budget.
The BBC knows perfectly well that when private finance is being used for capital allocation throughout the public sector, it is not unreasonable that it also seeks to cover its capital requirements to a considerable extent in that way. The BBC World Service is prepared to look at the matter positively. Why cannot the hon. Gentleman do so?

Mr. Harris: Although I welcome and accept much of what my right hon. and learned Friend has said, does he nevertheless accept that a 20 per cent. cut in the capital programme of the World Service means a reduction of £5.4 million? Is he confident that that shortfall can indeed be met by the PFI? If he can assure the House on that point, he will carry most hon. Members with him.

Mr. Rifkind: My hon. Friend makes a fair point. We are not expecting the BBC World Service to cover all of its capital requirements through the private finance initiative. It will have some £62 million available over the next three years on the basis of the allocations that were announced yesterday. In relation to the proportion for which we are looking to private finance, I can only emphasise that the managing director of the BBC World Service said that he was hopeful that it could make significant progress. It is therefore entirely reasonable for the Government to take the matter forward on that basis.

Mr. Batiste: What does my right hon. and learned Friend consider the impact will be of the BBC's freedom to operate internationally on a commercial basis in television and multimedia? Is not this a massive market opening up for the BBC, and is not the BBC well placed to take full advantage of it?

Mr. Rifkind: Yes. I draw particular attention to the BBC Worldwide TV News, which is already available in 43 million homes and in 111 countries. The truth of the matter is that the BBC World Service already attracts more listeners than the world services of all other countries combined. It is the Government's policy to ensure that that remarkable achievement is maintained.

Mr. Shore: Precisely. The BBC World Service is a great international service and an enormous asset to this country, and what we are talking about is precisely the capital investment which will give it the further audibility and visibility that will enable it to continue to be heard and watched by millions of people overseas. We have no greater asset internationally than the World Service. Does the Foreign Secretary also understand that he is cutting the third year of a triennium of investment? One cannot


muck about with a three-year programme at the end of year two and expect people to be able to attract alternative finance in the remaining 12 months. Will the Minister go back and think again about refraining from damaging a great national asset?

Mr. Rifkind: I respect the right hon. Gentleman's clear and genuine commitment to the BBC World Service. If he is as committed as we are to improving the audibility of the World Service, which I believe he is, he might have paid tribute to the fact that we have a £166 million investment programme to improve the audibility of the BBC World Service. The sum announced yesterday to be achieved through the private finance initiative for next year is £5 million. If the BBC itself is hopeful that that can be done, perhaps the right hon. Gentleman, on reflection, will regret the vehemence with which he put his question.

Mr. Lester: I am second to none in my support for the Budget in the sense that my right hon. and learned Friend the Chancellor wants to make this country the enterprise centre of Europe. Does my right hon. and learned Friend the Foreign Secretary accept that many of us realise that the diplomatic corps, which the Budget has assisted and reduced, the World Service and the British Council are very much part of Britain's influence in the world, from which our trade flows? Does he accept that some Conservative Members are worried about any damage whatever to that element of the British effort in the wider world?

Mr. Rifkind: I agree with my hon. Friend. That is why we have protected the operating costs of both the BBC World Service and the British Council from the economies that are being made elsewhere in the public sector. I entirely endorse the objective that my hon. Friend has stated. If we did not take the same view, we would have subjected the operating costs of the BBC and the British Council to cuts. We have not done so. That is an indication of our good faith.

Sir David Steel: While the Foreign Secretary rightly extols the virtues of the BBC's Worldwide TV News, has he noted the point made in the Lothian lecture this week by Mr. Jon Snow, that withdrawal of that service from access to China and its replacement by Mr. Murdoch's channel was not a good example of British interests being solved by private finance?

Mr. Rifkind: That is not the private finance initiative to which I referred earlier, as the right hon. Gentleman perfectly well knows. The BBC World Service receives an allocation of about £170 million. It determines its priorities within that and its ability to transmit to individual countries. We wish it well in the work that it does. I have not the slightest reason to believe that any announcements made recently will inhibit the BBC in maintaining its extraordinary achievements of the past 20 years.

Nigeria

Mr. Winnick: To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on present relations with the Nigerian rulers. [862]

Mr. Hanley: As my right hon. and learned Friend said earlier, Nigeria is currently suspended from the Commonwealth. We are acting in conjunction with other Commonwealth countries and our EU and other partners.

Mr. Winnick: Is it not perfectly clear that the response of the Nigerian rulers to the country's suspension from the Commonwealth has been one of total indifference? Just a few minutes ago, the Minister justified the sanctions against the murderous regime in Iraq, and I understand and appreciate why. Why are we adopting a different attitude towards the murderous regime in Nigeria?

Mr. Hanley: The two countries are different, their histories are different and the reaction to both has been different. The hon. Gentleman will be well aware that the sanctions imposed on Iraq are UN sanctions, and he will be aware also that we are still working on an effective reaction to what Nigeria has carried out recently. We have a unique arrangement in the Commonwealth to impress on Nigeria the seriousness of its actions, and we will work to do more until Nigeria wakes up to the realities and reforms itself.

Mr. Ian Bruce: Does my right hon. Friend agree that, in taking action against Nigeria, we must be careful not to take action against the Royal Dutch Shell Company which might result in the Nigerian rulers not having to pay Shell its share of the oil revenues? Does my right hon. Friend also agree that we must not allow the rulers of Nigeria simply to sell the oil on the open market and gain more funds for their terrible regime?

Mr. Hanley: My hon. Friend is right. We must leave to Shell the actions that Shell should take. I had extensive discussions with the chairman of Shell very recently, as did my right hon. and noble Friend the Minister for Overseas Development. There is little doubt that the project which Shell has now set up will help relieve the abject poverty in Nigeria. All of our projects in Nigeria have a long lead time, and revenues from the gas sales are unlikely to flow until early next century, but to cancel the project now would be to impoverish Nigeria for many years to come.

Rev. Martin Smyth: Will the Minister confirm, in the light of an earlier response from the Foreign Secretary, that we have not been making direct representations to the Nigerian Government? Does the right hon. Gentleman share the belief of many people in the United Kingdom that we ought to be making representations for the sake of the Nigerians who live among us and because of our concern at the way in which people are being treated in that country?

Mr. Hanley: I can say to the hon. Gentleman only what my right hon. and learned Friend the Foreign Secretary said earlier. We have noted the calls for the severing of trade links and for an oil embargo, and we are considering a wide range of options with our European Union and other partners. We have not ruled out anything at this stage. An oil embargo could be policed effectively only by a naval blockade of Nigeria, and we are looking to the international community to adopt the measures which we and others have already taken. All of that will maximise the pressure on the Nigerian regime.

Middle East

Mr. Carrington: To ask the Secretary of State for Foreign and Commonwealth Affairs what progress is being made towards achieving peace in the middle east. [864]

Mr. Rifkind: Despite Yitzhak Rabin's tragic death, the peace process is continuing. Shimon Peres' commitment


to peace is clear—Israeli troops were redeployed from Jenin on 13 November, six days early. We are also hopeful that there will be progress on the Syrian track.

Mr. Carrington: In the light of the tragic death of Prime Minister Rabin, will my right hon. and learned Friend impress on the Israeli Government that they need not give concessions to the hardliners in Israel? In particular, will he impress on the Israeli Government the urgent need to stop Jewish settlements being built in Arab Jerusalem?

Mr. Rifkind: I believe that the Israeli Government themselves are disinclined to make concessions of the kind to which my hon. Friend refers. The new Israeli Prime Minister has emphasised that the pursuit of peace is his single most important priority. He appears to have been developing a good relationship with the Arab Heads of Government around Israel, and he is also thinking positively about trying to get the Syrian-Israeli negotiations moving again.

Mrs. Jane Kennedy: How much of the international aid pledged to the Palestine National Authority has so far been released? Can the Secretary of State explain what effect the cut in the overseas aid budget that was announced yesterday will have on Britain's ability to keep her promises in that regard?

Mr. Rifkind: We have committed ourselves to about £83 million-worth of bilateral and multilateral aid to the Palestinians. A lot of that has already been provided. When I was in Gaza recently, I indicated an extra £3 million-worth of aid and do not anticipate any change in those proposals as a result of the announcement yesterday.

European Intergovernmental Conference

Mr. Hain: To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on progress made by the reflections group in preparing the agenda for next year's intergovernmental conference. [867]

Mr. David Davis: I expect the study group to present its final report to the Madrid European Council in December.

Mr. Hain: Is not one of the greatest threats to Europe and its competitiveness the huge burden of mass unemployment? Should not one of our major objectives be to get Europe back to work? At next year's intergovernmental conference, will the Government therefore support a proposal to amend the treaty on European union to include in its objectives a commitment to full employment?

Mr. Davis: I noticed that the hon. Gentleman moved from the Whips Bench before he asked his question, and now I can see why. The greatest threat to employment in Europe is Europe's inability to compete. The leader of the Labour party knows that, which is why he made his disingenuous speech to the Confederation of British Industry a little while ago. The right hon. Gentleman was trying to represent Labour policy as the ability to pick and choose between which parts of the social chapter it would take. He ignored the fact that most of the social chapter is decided by qualified majority voting, so he would not have a choice, and that the part that is not decided by such

voting would be given over to it by Labour policy. He was trying to put a disingenuous fig leaf in front of the greatest threat to Britain's ability to compete—Labour policy.

Mr. Wilkinson: Is not the single greatest deficiency in the process of European construction the fact that, for the British people, it does not have popular support? To win back that support, can my hon. Friend say whether the Government will press for restitution of the superiority of British law over European law at the forthcoming intergovernmental conference and, in particular, for the need to do something about the European Court's ability to impose retrospective judgments?

Mr. Davis: My hon. Friend is certainly right in respect of the need to rebuild popular support for the union. Prior to the intergovernmental conference, we presented to the reflections group of the European Union a paper that tackles that very issue—unpredictable and highly expensive judgments that have major retrospective consequences on Governments who try to carry out European law in good faith, as the British Government always do.

Mr. Skinner: Just to make sure that everyone understands what has happened since 1971, can we get it on the record that on 28 October of that year the Tory Government took us into the Common Market? In the next decade, Lady Thatcher passed the Single European Act. She forced it through on a guillotine and gagged Tory Members of Parliament who wanted to oppose it—every Labour Member opposed it. Then, in the 1990s, another Tory Government decided to sign the Maastricht treaty. Once again, we opposed it. Let us get it on the record that it is the Tory Government who have got this European issue round the necks of the British people.

Mr. Davis: The people who have most to worry about as a result of what the hon. Gentleman says are those on the Labour Front Bench. He just condemned them out of his own mouth. Let us get on the record the fact that enlargement of the European Union, the social opt-out, the single market, competitiveness and deregulation and our record on inward investment are all things of which we are proud in our policy on the European Union.

Mr. Gill: Is it not a fact that the Labour party not only wants to make us uncompetitive by adopting the social chapter, but wants to make us doubly uncompetitive by returning to fixed exchange rates?

Mr. Davis: My hon. Friend is absolutely right. One of the things which Labour tried to cover up at its party conference was the part of its conference document which said that it would not stand for any permanent opt-outs. That means that, whatever it said about European monetary union, it has decided now that at some point it will join.

Ms Quin: If, as the Minister claims, European social policies are economically damaging, how is it that several European countries, such as Denmark, Belgium, Luxembourg, Germany and Italy, which accept the social chapter, are not only higher up the Organisation for Economic Co-operation and Development world prosperity league than us but have improved their position since 1979, whereas we have dropped from 13th to 18th?

Mr. Davis: I am very surprised at the hon. Lady. I should have thought that the Labour party would


concern itself first and foremost with employment. When it comes to employment, we are top of the major country league in Europe—above Germany, above France, above Italy and above Spain.

Trade Development

Dr. Spink: To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the extent to which his Department has achieved its trade development responsibilities. [868]

Mr. Hanley: Commercial work is now the Foreign and Commonwealth Office's largest single area of activity overseas, involving 35 per cent. of the time of our front line staff. The volume of UK exports grew by 11 per cent. in 1994 against a 9 per cent. increase in the volume of total world trade. Foreign and Commonwealth Office posts overseas play an important role in helping UK exporters to achieve successes such as these and in helping inward investment.

Dr. Spink: I am grateful to my right hon. Friend for that answer. Will he continue to ensure that Foreign and Commonwealth Office help is focused on smaller companies that want to break into export markets and that major companies are helped because they create so many new jobs for Britain?

Mr. Hanley: I thoroughly agree with my hon. Friend. The competitiveness White Paper stated that 100,000 UK companies export, and we set a target of 30,000 new companies joining world exporters by 2000. The majority of those 30,000 companies are bound to be small and medium-sized enterprises. The Foreign Office, through our commercial staff overseas, devotes much of its time to providing market information and contacts to small and medium-sized enterprises—SMEs—which they could not obtain nearly as cost-effectively anywhere else. Around 60 per cent. of companies that take part in outward trade missions that are supported by our posts overseas are smaller companies, so I am pleased that my hon. Friend takes such a great interest in this matter. Our SMEs are benefiting from the help that the Foreign and Commonwealth Office can give them.

Mr. Campbell-Savours: Do not our trade development responsibilities include making representations to the American Government about the conduct of the Campbell Soups company from Campbell, New Jersey, which closed down a highly profitable manufacturing plant in my constituency? Will the Minister join me in asking the British people to boycott the products of that company throughout the country so that it learns the lesson that it cannot treat our people like rubbish, as it is at the moment?

Mr. Hanley: I not only watched the hon. Gentleman's Adjournment debate on the subject of Campbell Soups, but read it afterwards. I was interested by what he had to say, but it is not part of my responsibility to make representations to the United States on that matter.

Sir Roger Moate: Does my right hon. Friend agree that great opportunities exist for trade and development in the idea of the transatlantic free trade area, encompassing an enlarged European Community, the countries of the European economic area and the north American free trade area, which is so strongly supported already by my

right hon. and learned Friend the Foreign Secretary and the Government? Can my right hon. Friend say when practical negotiations might start and confirm that, even though the negotiations might be conducted by the European Community, Britain will have a significant role in such negotiations?

Mr. Hanley: I thank my hon. Friend for that question. The EU-US summit will deal with that matter. I agree with my right hon. and learned Friend the Foreign Secretary who, as he has said so firmly in recent speeches, is totally committed—as are Her Majesty's Government—on this matter.

Israel

Mrs. Roche: To ask the Secretary of State for Foreign and Commonwealth Affairs when he last met representatives of the Israeli Government; and if he will make a statement. [869]

Mr. Hanley: My right hon. and learned Friend the Foreign Secretary met Shimon Peres in Israel on 9 November. They discussed the middle east peace process, following the assassination of Yitzhak Rabin. Shimon Peres reiterated his commitment to continue to work for peace and he has, of course, our full support.

Mrs. Roche: I thank the Minister for that reply. Perhaps I may press him a little further about the peace accord with Syria. In response to an earlier question, the Foreign Secretary mentioned progress with the peace accord with Syria. Will the Minister give us some indication of how matters are progressing? Does he agree that a comprehensive peace accord, which covered Syria, in the middle east would be the greatest tribute that could be paid to the memory of Yitzhak Rabin?

Mr. Hanley: I agree with the hon. Lady. My right hon. and learned Friend spoke to the Syrian Foreign Minister yesterday in Barcelona and he spoke with President Assad in Damascus immediately after Mr. Rabin's funeral. The signs are better than they have been for some time that the Syrian track will be reconvened. More countries than ever before are expressing their good will and I hope that the events to which the hon. Lady referred will come to pass.

Mr. Hawkins: Does my right hon. Friend agree that it is a positive sign that, following the tragic assassination of President Rabin, leaders of Arab states who had never visited Jerusalem travelled there to attend his funeral? That should encourage the progress of the peace process, which is greatly welcomed.

Mr. Hanley: My hon. Friend is absolutely right. He has put his finger on one of the reasons why many people are now more hopeful about the peace process. The visits to Jerusalem by King Hussein of Jordan and representatives of the states of Oman and Morocco show that the Arab world wants as much as Israel and its immediate neighbours to see peace.

Mr. Gunnell: I am sure that, following his meeting on 9 November, the Foreign Secretary congratulated the Israeli Government on their early withdrawal of the troops to which he has referred already. Does the Minister agree that, if the elections to the Palestine National Assembly on 20 January are to be free and fair, it is very important


that they do not take place in the presence of occupying troops? Will the Government therefore do everything possible to encourage the Israeli Government to speed up the process of withdrawal so that the elections can take place in a constructive atmosphere?

Mr. Hanley: Yes. I can confirm that the British Government are committed to the success of the Palestinian elections. The withdrawal of the forces that the hon. Gentleman mentioned is extremely important. The elections are due to take place on 20 January, as agreed by the Palestine National Authority and the Israeli Government, and the European Union co-ordinating international observer group will be present. Four of the 30 staff in the co-ordinating unit are British and Britain is providing major input to the core of observers. Six long-term observers arrived on 9 November and are advising the Palestinians about policing the elections. I am grateful for the hon. Gentleman's question and for the good will that it implies.

India

Mr. Merchant: To ask the Secretary of State for Foreign and Commonwealth Affairs what plans he has to visit India to discuss the United Kingdom's relations with India. [870]

Mr. Hanley: My right hon. and learned Friend the Foreign Secretary had extensive discussions with the Indian Foreign Minister, Mr. Mukherjee, last week. He hopes to find an early opportunity to visit India, as I did last month.

Mr. Merchant: In view of the current unstable situation in Kashmir, will my right hon. Friend update the House on the situation with regard to the four hostages—two of whom are British—who are at present in the hands of political extremists?

Mr. Hanley: I am grateful to my hon. Friend for his concern. I am sure that all right hon. and hon. Members want the four hostages to be released as soon as possible. We have no further news about them at the moment. We are grateful to the Indian Government and to their various authorities which are helping to try to secure the release of the hostages.
Representatives of the group of four nations—our high commissioner and the American, German and Norwegian ambassadors—are working very hard and very well together to try to secure the release of the hostages. This morning I saw a report on Teletext that one of the hostages is ill. If a hostage is unwell—we have no proof that that is the case—the best thing that the hostage-takers can do is release him. The four hostages should be released now. No purpose is served by their continued captivity and, in the name of humanity, they should be set free.

Mr. Pike: It is clear that everyone accepts that the release of the hostages is essential and that keeping them plays no part in helping to end the position in Kashmir. Will the Minister ensure that the Indian Government are aware that people in this country believe that the Indian Government should be the first ones to take steps to end that long-standing problem? That might be of tremendous benefit, not only to India but to Pakistan and the whole of that part of the world.

Mr. Hanley: We believe that the best way to make progress on Kashmir would be a combination of three

main factors: first, simultaneous progress on dialogue between India and Pakistan, as provided for under the 1972 Simla agreement; secondly, an improvement in human rights in Kashmir and a genuine political process there; thirdly, a clear cessation of external support for violence in Kashmir.
While we are talking about the hostages, I pay tribute to their courage and the courage of their families, who have been remarkable under intense pressure.

Lady Olga Maitland: What response has my right hon. Friend had from the Indian Government to his efforts to persuade them to improve their relations with Pakistan? Is he aware that, because relations are poor, tensions are high and Pakistan is being pushed to spend a disproportionate amount of its resources on the armed services?

Mr. Hanley: I agree with my hon. Friend that nations tend to spend far more than they need to on building up their armed forces because of bad relations with their neighbours. This is a classic case in point.
We urge both India and Pakistan to resume a dialogue on bilateral matters, not least on Kashmir. Indeed, my right hon. and learned Friend the Foreign Secretary, in discussion with the Indian Foreign Minister, did exactly that. I hope that the whole House—Members of good will—will urge their individual contacts with the Pakistan and Indian Governments to discuss between themselves if that is the only way to achieve peace.

Nigeria

Mr. Pope: To ask the Secretary of State for Foreign and Commonwealth Affairs when he next plans to meet representatives of the Nigerian Government to discuss the situation in Nigeria. [872]

Mr. Hanley: We have no such plans.

Mr. Pope: Does the Minister accept that, if the British Government's arms and visa sanctions against the brutal Nigerian regime had been even remotely successful, there would have been no need to come back and announce further measures? Will he give the House an assurance that the visa controls currently in place regarding Nigeria will, at the very least, ensure that members of the brutal, vicious Nigerian Government are not allowed to enter or re-enter the United Kingdom?

Mr. Hanley: Under the present immigration rules, it has not been possible to cancel or revoke existing visas, but the Home Office has been notified of the EU decision and all members of the Nigerian provisional ruling and federal ruling council will now be refused entry to the United Kingdom even if they hold valid multiple entry visas issued before the new EU restrictions were agreed. I am sure that that comes as a comfort to the hon. Gentleman and other hon. Members.

Hong Kong

Mr. Soley: To ask the Secretary of State for Foreign and Commonwealth Affairs what assessment he has made of the progress being made in negotiations with China on Hong Kong. [874]

Mr. Hanley: We have reached several important agreements with the Chinese in recent months which are


very much in Hong Kong's interest, but much work remains to be done to ensure a successful transition for Hong Kong, which I believe all of us, including the Chinese, want.

Mr. Soley: Is the Minister satisfied that the Chinese Government and the leaders of the business community on both sides of the border recognise that, if the elected legislature were removed in 1997 and replaced only with members who had the approval of Beijing, enormous damage would be done to political and economic confidence in Hong Kong?

Mr. Hanley: I agree with the hon. Gentleman that it is vital to maintain confidence in Hong Kong. Members of the business community have impressed on me the fact that confidence is vital for their continued interests.
We are doing everything that we can to ensure that the business community feels comfortable with what we are doing. Indeed, the business community welcomes the continuing agreements that we are making with the Chinese. The Chinese, for their part, recognise that Hong Kong is responsible for about 25 per cent. of their gross domestic product. Hong Kong and the business links between the two countries are important to China as well as to our continuing interest in the region.
I therefore agree with the hon. Gentleman.

Middle East Peace Process

Mr. Hawkins: To ask the Secretary of State for Foreign and Commonwealth Affairs what assistance Her Majesty's Government are giving to the peace process in the middle east. [876]

Mr. Hanley: The £83 million of aid to the Palestinians has already been mentioned.
On his recent visit, my hon. and learned Friend the Foreign Secretary encouraged the Palestinians and Israelis to maintain progress on the Palestinian track. He also urged Syria and the Israelis to press forward in their negotiations, and encouraged all the countries of the region to support the peace process—as did I during my recent visit to the Gulf.

Mr. Hawkins: I thank my right hon. Friend for that helpful answer. Does he agree that it is crucial to keep in touch with all the leaders of the most moderate Arab states to ensure that they are encouraged to continue their dialogue in all the tracks of the continuing peace process with the Israeli Government?

Mr. Hanley: I strongly agree with my hon. Friend. Indeed, I believe that the reaction of the Arab nations to the tragic assassination of Yitzhak Rabin is one of the developments that give us the most hope that the peace process will now accelerate. We hope that Mr. Rabin's tragic death will not have been in vain.

Northern Ireland

The Prime Minister (Mr. John Major): With permission, Madam Speaker, I will make a statement about Northern Ireland.
Yesterday evening, the Irish Prime Minister and I met at Downing street to launch a new initiative in the Northern Ireland peace process. A copy of our joint communiqué has been placed in the Library of the House.
In the 15 months since the first of the two ceasefires, there has been a dramatic improvement in the daily life of people in Northern Ireland. They have enjoyed the freedom to go about their daily business without fear of terrorist attacks. Many new jobs have been created. Much new investment has arrived. New opportunities have opened for people of all ages.
We have responded positively—following advice from the Chief Constable and the GOC—to the much reduced threat to security. By the end of this year, half the Army's emergency or roulement battalions will have left Northern Ireland. Security infrastructure has been dismantled. Remission rates for scheduled offenders have been returned to their pre-1989 levels.
Although we have a ceasefire, however, we are still far from a comprehensive political settlement. To work towards that, we must establish a negotiating process that is open to all democratic parties, and embraces all democratic parties. That aim underlies the twin-track initiative that we have now launched with the Irish Government. The first of the two tracks in the joint communiqué will involve invitations to the parties to intensive preparatory talks.
These are not substantive negotiations on Northern Ireland's constitutional future; they are designed to prepare for such negotiations in the future. There are many issues to be resolved if substantive negotiations are to take place successfully. The preparatory talks will consider the best structure and format for all-party negotiations, and how those negotiations can address all the relevant relationships in an interlocking three-stranded process. Several of the parties in Northern Ireland have suggested that an elected body could play an important part in all-party negotiations. Other parties disagree. As the communiqué makes clear, this is an idea that will be discussed in the preparatory talks.
As I have indicated, meeting the requirements of paragraph 10 of the Downing street declaration will be an essential condition for any party claiming a seat at the all-party negotiations. Not all the parties yet do so. That too will be a valid subject for discussion in the preparatory talks.
The format for those talks is intentionally flexible and permissive. We shall build on the exchanges and bilateral contacts that have already taken place. We shall treat each party equally. Exchanges can be bilateral or—where the parties so wish, and where it will further the objectives of the preparatory talks—they could be multilateral.
This new round of preparatory talks is an opportunity for each of the parties in Northern Ireland to express its view, in whatever format it chooses, on the best way of moving the political process forward. It is an opportunity

for them to work together with one or other or both Governments, according to their wishes. It is an opportunity to generate fresh momentum. It threatens no one, no interest and no party. I hope that all the parties, each in their own way, will take advantage of this opportunity. The objective of moving towards a just and comprehensive settlement will be of benefit to all.
Let me turn now to the decommissioning of the weapons and explosives held in large number by paramilitary organisations linked to political parties in Northern Ireland. Before the Downing street declaration and the ceasefire, we recognised that the need to address this question was one of the practical consequences that had to follow the ending of violence. In a democratic society, political parties cannot be linked to private armies. In a society where parties are committed exclusively to peaceful methods, there can be no need and no justification for holding illegal weapons and illegal explosives. In a democracy, parties and Governments cannot be expected to negotiate under the duress of an implicit threat of a return to violence.
For that reason, we have throughout this year sought to engage the representatives of both Sinn Fein and the loyalist paramilitaries in an exploratory dialogue on how their weapons will be taken out of commission. In order to achieve more progress in that area, we have now agreed with the Irish Government to establish an international body to provide an independent assessment of the decommissioning issue and have given it specific tasks. It will consist of three members under the chairmanship of Senator George Mitchell from the United States. They will act in a personal capacity and on an advisory basis.
The body has been asked to identify and advise on a suitable and acceptable method for full and verifiable decommissioning and also to report whether there is a clear commitment on the part of those in possession of such arms to work constructively to achieve that. We expect it to invite relevant parties to submit their analysis of matters relevant to the decommissioning issue. The Governments are not setting limits to the scope of the submissions that may be made to it. It will be for the international body, in reaching conclusions within its remit, to consider such evidence on its merits.
We will not be asking the international body to question the Government's position on what has become known as the third Washington criterion. It has not been established to make recommendations on when decommissioning should start. That is a matter for governmental decision; and, as I have indicated, it is properly a matter for discussion in the preparatory talks. To avoid any doubt, let me stress that the Government stand by the three criteria on decommissioning, which my right hon. and learned Friend the Secretary of State for Northern Ireland set out in Washington earlier this year. We cannot see a way of securing the necessary confidence to bring all parties to the negotiating table without a start being made to the decommissioning of illegal arms.
This is not a matter of dogma; it is a matter of practicality. It goes without saying that we, like the Irish Government, will consider constructively any practical suggestions that could help bring all parties into negotiations on the basis of the Downing street declaration.
It is no secret that yesterday's agreement between the two Governments required long and difficult negotiations. The British and Irish Governments agree on the need for


disarmament by the paramilitary organisations, but we do have an acknowledged difference of opinion about its timing. We have decided not to allow that difference of opinion to stand in the way of forward movement along these twin tracks. That is a measure of our determination to continue working together in the future as we have done in the past.
We have asked the international body to report by the middle of January. We hope that progress on both tracks will then enable the two Governments to launch all-party negotiations by the end of February. That is our firm aim. I am confident that it is attainable, but it will require a serious commitment by all concerned. We are ready to make that commitment. But let me make a crucial point. The British and Irish Governments cannot themselves make peace in Northern Ireland. Our role in the process is to facilitate the making of that peace.
We have borne a great deal of the burden. We have been ready to take risks for peace. Now is the time for others to do the same. Now is the time for all parties and all groups to make a sincere and constructive contribution; for the paramilitaries on both sides to give not merely qualified verbal assurances, but a real and tangible commitment to peace. If they mean peace, they do not need guns and semtex. Now is the time for all the political parties to enter the preparatory talks, not with rigid and irreconcilable positions, but with the will to make them work. Ultimately a lasting and peaceful settlement is in their hands and not mine. I hope that they will all have the courage and the wisdom to grasp it.

Mr. Tony Blair: For reasons that you, Madam Speaker, and the Prime Minister know, I have to leave straight after the Prime Minister has responded to me. I hope that the House will not treat that as a discourtesy.
I welcome the statement the Prime Minister has made. We know that progress has been tough over the past few months and both he and the Taoiseach and their array of advisers deserve credit for their perseverance and dedication.
Can I be sure that I have accurately understood the status of both the preparatory talks and the establishment of the international body on arms decommissioning? I understand that the preparatory talks will be bilateral or multilateral. They are designed to facilitate the all-party talks and will involve all parties, but will not in themselves be negotiations on the substantive constitutional issues. The international body similarly will advise on the issues connected with decommissioning, but will not deal with the question of whether arms are decommissioned prior to all-party talks. Therefore, both the preparatory talks and the international body are, in a sense, designed to create a mood and momentum by which the all-party talks can take place.
May I express our support for the view that, for those all-party talks to take place, there has to be full trust and confidence that each party in those talks will abide by and accept exclusively the democratic path? Trust is the key. There can be no threat, implicit or explicit, of any return to violence by any party if such talks are to be successful.
Will the Prime Minister acknowledge that this agreement, although of course it does not resolve the problem of decommissioning, produces a mechanism by

which the question can be discussed? There is a heavy obligation on all those who say that they want peace to prove it by engaging in this process and providing solutions to the outstanding problems.
Will the Prime Minister tell the House how the preparatory dialogue will operate? In particular, how will the two Governments be involved and when does he expect the first meetings to take place?
The Prime Minister mentioned the idea of an elected body playing some part in this process. Can he tell us how he would envisage the possibility of such a body becoming part of the peace process? What would be the timing of establishing such a body and, in particular, what would be its role in relation to the all-party negotiations that the two Governments hope to establish?
We essentially agree with what the Prime Minister has done today, and we welcome the framework that has been set out. It is not a solution, but it may provide a bridge to a solution. In constructing that bridge, the Irish and United Kingdom Governments should know that they will have the whole-hearted support and good wishes of all decent people in the United Kingdom and the Republic of Ireland.
For 15 months, although unacceptable violence of a sectarian nature still continues, there has been without doubt a transformation in the lives of the people of Northern Ireland. Their liberation from the bomb and the bullet has brought new hope and the chance of renewed prosperity. Peace is now too precious to squander. The duty lies on all parties to make this process work. From the outset, the Labour party has regarded this issue as transcending party politics. We have supported the Government in their search for peace because we believe it to be right. We have worked with the Government and will continue to do so.

The Prime Minister: I am grateful to the right hon. Gentleman for his comments and his consistent support. I am also grateful to him for explaining to me his impeccable reason for needing to leave the Chamber during the course of this statement. I fully understand that that is unavoidable.
I join the right hon. Gentleman in the tribute that he paid to the Taoiseach. The Taoiseach has shown great courage and persistence, and I much admire what he has done. We have not invariably agreed on every matter, and all our discussions have not been easy, but I have found him an honest and straightforward man with whom to do business and I believe that, between us, we have made progress.
The right hon. Gentleman's characterisation of the preparatory talks and the decommissioning body was correct and I shall not reiterate the points that he put. They were certainly right. He raised a number of specific questions about the preparatory talks: how the Governments will he involved; and when they will start. We have set ourselves ambitious targets. We shall need to make a start on both tracks within a matter of days and we shall seek to do so. I hope that each Government will issue invitations to preparatory talks very soon. The starting point will obviously be existing exchanges and bilateral contacts, but we shall encourage other formats for meetings where the parties believe that they might further the objective of securing agreement.
This will be an intensive process. The two Governments have set out a way forward, but, as the right hon. Gentleman intimated, it requires the co-operation of all the parties in the tracks if we are to achieve real progress towards the targets that we have set ourselves. The right hon. Gentleman also asked about the role of an elected body and whether that could play a part in the negotiating process. Certainly it will. That is one of the propositions for serious consideration in the preparatory talks.
Both the Unionist parties represented in the House have put forward interesting and constructive proposals. They are not the same but they are both worthy of careful consideration by all the parties with an open mind, and we shall endeavour to ensure that that is precisely what they receive. The key to this, as to so much else in this process, is what will give the parties the confidence to come together for substantive political negotiations. If an elected body can play a part in that—one can certainly see circumstances in which that could be the case—it should be looked at very hard and it most certainly will be in the preparatory talks in the weeks ahead.

Mr. Tom King: Is my right hon. Friend aware that there are obvious fears about the significant risks that are being taken in the initiative that he has announced and agreed with the Taoiseach? Is he also aware that there were even more significant risks in allowing the logjam to continue and no progress to be made? In that respect, will he accept the strong support, as echoed by the Leader of the Opposition, for the view that there is no prospect of all-party talks of any value and meaning unless there is confidence between the parties? It is therefore essential that Sinn Fein-IRA and other paramilitaries recognise the challenge that they will face in a matter of weeks—I understand that the commission is to report by the middle of January—and that they give clear evidence and conviction to all those concerned that they are genuine about becoming non-violent democratic parties and are prepared to embark on the decommissioning of arms.

The Prime Minister: I am grateful to my right hon. Friend. I share his judgment about the relative balance of risk between proceeding as we propose and not having proceeded at all. I believe that we have made the right judgment. No progress in this affair is without risk and it could never have been without risk.
I share the view that my right hon. Friend set out. The key to progress is to establish proper confidence between the parties, and all those who propose to take part in the negotiations must be set upon a secure democratic future. This is not a new condition or proposition. It was set out clearly in paragraph 10 of the joint declaration when we embarked on this whole affair and it remains as relevant and important today as it was on the day when we first agreed it.

Mr. Paddy Ashdown: I am happy to welcome and support the Prime Minister's statement and the joint communiqué on which it was based which was issued last night. This is not a breakthrough. The bottom line problems remain to be resolved, but it returns momentum to the peace process and provides a time frame and a structure within which those problems can be resolved. That may not be very tidy, but it is sensible and good politics.
We are now less than three weeks away from the anniversary of the publication of the foundation document. The Prime Minister will no doubt agree that the only rock on which that document and the peace process can be founded is absolute unanimity of purpose and action on the part of the British and Irish Governments. Perhaps he will confirm that in the process that he sees ahead, we shall overcome the disagreements and divergences that have perhaps taken some momentum from the peace process over the past few weeks.
On the role of an elected assembly, we support the Government's position that talks cannot take place between all parties until the process of decommissioning has started because that is the clear indication that all parties have committed themselves exclusively to the democratic process. But does The Prime Minister agree that the establishment of an elected assembly may have a role in that as well, and that in this matter the Irish Government may have a role to play in encouraging those who have so far been reluctant to take part in that to do so?
Finally, the Prime Minister said that within the next two or three days invitations will be issued to the parties for the exploratory talks. May we take it that that means that he sees those talks starting in a week or so—at all events before Christmas?

The Prime Minister: I am grateful to the right hon. Gentleman. The answer to his last point is yes. I certainly see the talks starting as speedily as we can manage and invitations being issued within a few days. I hope that all those who receive those invitations will both join in those talks and join in them at senior decision-making level within their parties because that is important.
The right hon. Gentleman is right that there is a balance of advantage, a very clear balance of advantage, in working with the Irish Government. We do not agree on every aspect; both the Taoiseach and I would state that quite plainly. There is no doubt that there is a different perspective on some of the matters that we have been discussing, but the prospects for success are infinitely greater if the two Governments can continue to work together in this process rather than apart. There were efforts during the past few months by some of the parties involved to seek to provoke differences and breaks between the two Governments. We are well aware of the number of occasions on which they tried to do that and we have resisted.
I am grateful to the right hon. Gentleman for what he said about decommissioning. As I said a moment ago, that was set out in the Downing street declaration. It is not a matter of dogma but of practicalities. No one has yet found an alternative way of providing confidence. The hon. Member for Upper Bann (Mr. Trimble) once said that if there were other ways, of course one could look at them. But no one has yet provided another way. We shall wait to see whether one is provided. As for an elected assembly, I do not need to reiterate what the right hon. Gentleman said: I agree with it.

Mr. Andrew Hunter: In warmly welcoming yesterday's communiqué and my right hon. Friend's statement, may I ask him to confirm that the international body will be purely advisory, that it will have no executive role and that both Governments will be free to respond to its suggestions in the way that they wish?

The Prime Minister: Yes, I can confirm all my hon. Friend's points. It will have an advisory, not an executive


role. Of course we shall listen carefully to what it has to say and both Governments will consider its recommendations, but, ultimately, it is for the British Government to take decisions on matters affecting Northern Ireland and for the British and Irish Governments to take decisions jointly on matters that are of joint interest to north and south and between the United Kingdom and the Republic of Ireland. I believe that the international body, although advisory, will have a very valuable role to play.

Mr. David Trimble: I note that the communiqué that was issued last night is in its essentials identical to the one that would have been issued at the beginning of September if the Irish Government had not given way to IRA threats at that time. In his statement the Prime Minister referred to paragraph 10 of the Downing street declaration and said that meeting the requirements of paragraph 10 are an essential condition. He will know that one of those requirements is the need to establish a commitment through exclusively peaceful means. I welcome what he said in the statement with regard to the decommissioning requirement and I welcome that clear restatement of the Government's position, but does he agree that there is also stated in paragraph 10 of the Downing street declaration a need for parties moving into all-party talks to have a democratic mandate and to show a willingness to abide by the democratic process? Does he agree that that mandate can be obtained, and that willingness to abide by the democratic process can be shown, only by the parties submitting themselves to an election and showing a willingness to participate in an elected body, and that, therefore, the sooner we have such an election and such a body, out of which negotiations can subsequently be developed, the better?

The Prime Minister: There is a great similarity between the agreement that would have been reached in September and the communiqué that was issued last evening. One difference of course between the two, as the hon. Gentleman will know, is that the communiqué issued yesterday was far more detailed in its content than the relatively brief communiqué that was still-born in September. To that effect, the time that has been lost has not been wholly lost because we have made some progress in the detail of the matters.
The hon. Gentleman quotes paragraph 10 correctly and that is, of course, one of the ways in which parties may achieve a democratic mandate. We said clearly in paragraph 10 that
democratically mandated parties which establish a commitment to exclusively peaceful methods and which have shown that they abide by the democratic process, are free to participate fully in democratic politics".
That has been our guiding position from the outset and it remains so.

Mr. Peter Robinson: Does the Prime Minister accept that my colleagues and I have always been willing to meet him and to express our views on how political progress can be made and that we shall continue to do that, but that we are not prepared to be included in a process in which Sinn Fein-IRA plays a part while it still holds on to its semtex and weapons?
Will the Prime Minister explain to us how it is fair and just in paragraph 4 of the communiqué that constitutional and legitimate political parties should be treated on an equal basis to a political group that is a support organisation for a terrorist organisation, which, in turn, still holds on to its weaponry? Will the Prime Minister explain in relation to paragraph 3 what the term "widespread agreement" in that context is intended to convey? Is it possible for a talks process to begin without the support of all the Northern Ireland political parties?

The Prime Minister: We certainly seek as broad as possible participation and I hope that we can have universal participation. That would certainly be the best guiding star to achieving a satisfactory outcome and I hope that the hon. Gentleman and his party, who represent a great deal of important opinion in Northern Ireland, will play a constructive role. They have an important role to play. The proposals that he and his hon. Friend the Member for North Antrim (Rev. Ian Paisley) brought to me recently were constructive. The hon. Member for Belfast, East (Mr. Robinson) will see the echo of them in the reference to an elected assembly in the communiqué that was issued yesterday. I should like to continue that constructive approach and I hope that he and his party will contribute to these discussions at a senior decision-making level.
As the hon. Gentleman knows, we are seeking the prospect of a proper dialogue for peace, but there is a dilemma for the two Governments in that respect: we cannot ensure that dialogue ourselves. We can only encourage it. The hon. Gentleman and other hon. Gentlemen with political responsibility for parties in Northern Ireland can deliver it and I very much hope that they will do so. They can help to ensure peace or they can help to prevent peace. I very much hope that they will work to ensure it.
As we have seen in the sad history of Northern Ireland, it is very easy to prevent peace. All that is necessary is to play to the old script, stand on the sidelines and play on the old fears and there will be no lasting peace. We know that that is the case. The history of Ireland has sadly told us that, but there is an alternative: if the people of Northern Ireland, who have shown great courage, can find a similar courage in all their political leaders—courage and determination to banish the old enmities—then, in joining in these discussions, those leaders can provide a more secure future for Northern Ireland than it has ever known in the past. That is a very great prize. It is a prize that is worth examining very carefully. It is worth examining all the options, including the option of deciding to engage in these preparatory talks.
The hon. Gentleman set out correctly what is necessary before one can move to what one might call the mainstream constitutional talks. We are here talking about the preparatory talks, and I hope that he and his party will show the same constructive spirit as they showed when they called upon me recently in Downing street, and will join in the talks, for the sake of the contribution that they can bring to making them a success.

Mr. Clive Soley: Will the Prime Minister accept that we should not take the present ceasefire for granted? That is why the talks last night were so welcome, because they prevented the ceasefire from beginning to fray at the edges, as some of us feared that it might, given that there are always a few people who would like to return to violence. More importantly, will the right hon. Gentleman confirm that the British and Irish people expect the parties to participate in the preparatory talks, and that failure to do so would cause enormous damage to the communities that they represent in Northern Ireland?

The Prime Minister: I am grateful to the hon. Gentleman for what he has said. Certainly it is not wise to take the ceasefire for granted. One illustration of the extent to which that is true is that although, mercifully, we have had 15 months free of bombings and murder, emphatically we have not had 15 months free of crime and thuggery. Day after day, on both sides, punishment beatings have occurred, and people utterly defying the normal rule of law have taken it upon themselves to enter homes and break them up with baseball bats, and to break the arms and legs of teenagers with baseball bats for not toeing what those people thought was the appropriate party line in their particular part of Northern Ireland. That is not peace as I understand it, and it provides an illustration of the dangers that lie there.
There is one other relevant point: if the parties that have not been bombing and killing over the past 15 months are genuine in what they have repeatedly said since we lifted the broadcasting ban and enabled them to speak directly to the world, the peace that they seek is permanent. If that is true, there can be no question of going back to guns and bombs. In the future we shall find out whether, when they talked of peace over the past months, they were speaking the truth, or whether they were not. I hope that it will turn out that they were. Time alone will tell.

Mr. James Couchman: May I join others in congratulating my right hon. Friend and the Taoiseach and all who have worked towards this welcome progress? The international body is to be given a substantial task, and a formidably short time in which to do it. My right hon. Friend has named the chairman of the international body; can he say when he expects to be able to tell us the names of the other people serving on it?

The Prime Minister: I hope that we shall be able to announce the other two names speedily—I hope that one will be Canadian and the other Nordic. We are going through the final processes now and, as soon as those names are confirmed, and agreed by their Governments, I shall make them public.

Mr. Dennis Canavan: Does the Prime Minister now agree that to make total or even partial arms decommissioning a precondition for all-party talks is rather impractical, because arms handed over today could be replaced tomorrow? And will he therefore pursue more vigorously the twin-track approach, with a firm starting date for all-party inclusive talks, which would help to find an agreed new constitutional settlement, as well as helping to bring about the total arms decommissioning that we all want to see?

The Prime Minister: The hon. Gentleman is right that the ultimate prize is complete decommissioning, not the

partial decommissioning that we seek before we get to all-party talks. The problem is a practical one. Unless there is some partial decommissioning there is unlikely to be confidence among the other political parties that Sinn Fein is committed permanently to peace, and we cannot have all-party negotiations unless all parties are prepared to sit down and talk together. The reality of life is that, without something that will engender confidence—[Interruption.] The only thing that we have been able to identify is a decommissioning of some of the arms. If there is an alternative, it has not yet been produced. If it is produced, of course any sensible person would look at it. But it has not yet been produced and we have not been able to conceive what it might be. It is a practical problem, not a dogmatic problem. I hope that that point will be understood by those who have the arms and could decommission a portion of them to try to engender the confidence to ensure that those all-party talks can then take place.

Mr. David Wilshire: May I congratulate my right hon. Friend on his perseverance and wish him well with his future endeavours in the matter? Does he accept that a considerable number of Conservative Members believe that it is absolutely crucial that we put beyond all doubt and misunderstanding the central issue of decommissioning? Will he therefore confirm that there is absolutely no question whatever of the Government agreeing to enter into all-party talks before a start has been made on decommissioning?

The Prime Minister: I have indicated to my hon. Friend several times this afternoon that that is the Government's position. More relevantly, it is not only the Government's position. We must make that clear. It is the position of the parties who would be party to the talks. That is the real point. The parties would have to sit down together.
A number of the parties take the view, and I myself would not question that view—it is absolutely understandable—that they would not have confidence to sit down with Sinn Fein until they have a greater indication that Sinn Fein is prepared to disarm. That is the substantive point. It was implicit in the Downing street declaration mentioned earlier. It has been implicit ever since. My right hon. and learned Friend the Secretary of State for Northern Ireland set it out in the three Washington conditions, the third of which is the one to which my hon. Friend refers. That remains the Government's position.

Mr. Kevin McNamara: Is the Prime Minister aware that all people in these islands will be congratulating him and the Taoiseach on having overcome some considerable difficulties and differences of opinion in achieving the communiqué yesterday? It is greatly welcomed. Will he answer two points? First, in talking about the three interlocking agreements, can he confirm that the principle that nothing is agreed until everything is agreed still stands? In relation to confidence-building measures, will he confirm that the proposal of an elected assembly may in itself cause a lack of confidence in other participants, bearing in mind, as they do, the fact that the result is a foregone conclusion,


that the constituency itself was drawn up to give that particular electoral conclusion and that they have unhappy memories of Stormont and of the conventions?

The Prime Minister: That is of course a proper matter for discussion. But there is one thing that I hope that we will be able to do. Time after time in the history of Northern Ireland an opportunity to progress in one form or another has been pushed aside because something similar was tried at some stage in the past and did not succeed. The hon. Gentleman is right in saying that the assembly route was tried in the past and did not succeed. But that was in a different time and in different circumstances. That is not to say that it would not succeed on this particular occasion.
I am saying to all the parties that I hope that they will stand back and consider whether it is possible to put some of those old shibboleths to one side and decide in the circumstances of 1995, on the back of the talks that have taken place, on the back of the changed situation that exists in the everyday life of people in Northern Ireland, in the understanding that this may be a chance that may not readily be repeated in the years ahead if it slips away from us, and when everyone should be prepared to go to the limit of what is tolerable for them and their view, to see if we can reach a communal settlement.
In that sense, I ask the hon. Gentleman not to rule out instinctively the question of going down the route of an elected body. One of the proposals is that there should be an elected body—not to govern Northern Ireland, but from which a negotiating team with a proper mandate to negotiate the future is drawn.
Negotiating those constitutional points will not be easy. I am open-minded about how those constitutional talks come about, but I can see the advantage that some of the political parties in this House see in having an elected assembly—not to govern Northern Ireland but to produce nominees from that assembly to negotiate constitutional matters for Northern Ireland. I hope that that matter will not be pushed aside by anyone in these preliminary conversations.

Mr. Richard Spring: I congratulate my right hon. Friend the Prime Minister and my right hon. and learned Friend the Secretary of State for Northern Ireland on so assiduously seeking a resolution of the problems in Northern Ireland. Does my right hon. Friend the Prime Minister agree that a democratically elected body in Northern Ireland could be entirely consistent with the often expressed commitment of the Government not to seek to impose solutions on the Province?

The Prime Minister: My hon. Friend is quite right; it would be consistent. That is legitimately one of the matters for discussion in the preparatory talks and thereafter. The fact of the matter is that the possibility of imposing solutions is more apparent than real. One cannot impose a solution that is not acceptable to the people generally. We need to reach agreement on those issues, and that is why it is so important that the discussions between all parties take place.

Mr. Robert McCartney: Does the Prime Minister agree that, although the issue of

decommissioning has been firmly put in place by his statement today, Sinn Fein will not be admitted to substantive negotiations until it has physically commenced decommissioning? There is of course a more significant point, and that is the whole issue of consent. It seems to me—I am sure that the Prime Minister will agree—that the whole basis of the Downing street declaration was that the principle of consent, which is consent by the greater number of people in Northern Ireland, should rule any agreement. Does the Prime Minister therefore confirm that Sinn Fein will not be admitted to any substantive negotiations until it has unequivocally accepted the principle of consent as a basis for discussion?

The Prime Minister: As the hon. and learned Gentleman knows, Sinn Fein cannot be admitted to talks with other parties until the other parties are prepared to talk to it. Therefore, the principle of consent, in that respect, lies in the hands of all the parties. There is a bigger issue on the subject of consent, and it is one that I sought to deal with some months ago. I have made it clear, and I happily reiterate it this afternoon, that if we are able to get through the preparatory talks and then move into all-party talks, and if those all-party talks reach an agreement, the agreement that emerges from the all-party talks will have to be put in a referendum to the people of Northern Ireland for their consent. Given the nature of what is under discussion, that is proper. I reiterate that that consent, in that respect, remains at the heart of the Government's plans.

Lady Olga Maitland: May I welcome my right hon. Friend's courageous determination to keep up the momentum? Will he confirm that the international body has a clear remit to consider only illegally held weapons, and that there is no question that the legally held weapons of the security forces in Northern Ireland will be dragged into the process?

Mr. Major: Yes, I can confirm that for my hon. Friend. That point is explicitly made in the communiqué agreed between the Taoiseach and myself.

Mr. Ken Maginnis: May I begin by thanking the Prime Minister for clinging so tenaciously, if somewhat precariously, to his Washington third criterion, which requires that a full decommissioning process be agreed and the first phase be implemented before any paramilitary organisation can enter into substantive talks? May I caution him that the Irish are very good wordsmiths who are able to craft their language in a way which means all things to all people? Does he recall that Albert Reynolds, who with him signed the Downing street declaration, was unable to understand the meaning of "commitment to exclusively peaceful means" to include decommissioning of illegal weapons? Does he also recall that, in 1985, the Government's commitment to allowing the status of Northern Ireland to be decided by the people of Northern Ireland was overruled by the Irish Supreme Court, which said that status was not defined—carefully not defined? In the communiqué, could it be that the Irish believe that decommissioning is not defined—carefully not defined?

The Prime Minister: The hon. Gentleman began by saying that there was great skill in the use of language in Ireland, and I would suggest that that skill extends to all


parts of the island of Ireland, both north and south. The hon. Gentleman has just illustrated that skill with great clarity, and I understand his point.
The hon. Gentleman was one of the early advocates of the possibility of an international body, and I congratulate him on his prescience in that respect. It is clearly a valid way forward, and we have decided to adopt it. We also were considering it at the time, and I am grateful for the hon. Gentleman's support. I believe that the hon. Gentleman is misjudging the communiqué in his use of language. The communiqué is not a fudge, and what is set out in it is very clear.
The only point of difference that exists between the British and Irish Governments has been set out clearly by both the Taoiseach and me last night and separately this morning. That point of difference has been acknowledged, but the substance of the communiqué is very clear and includes the remit of the international body and the nature of the arms to be considered by that body.

Social Security

The Secretary of State for Social Security (Mr. Peter Lilley): With permission, Madam Speaker, I should like to make a statement on social security following my right hon. and learned Friend the Chancellor's Budget statement.
For half a century since the creation of the welfare state, expenditure on social security has, on average, grown 5 per cent. a year faster than inflation. As a result, it has taken an ever-growing share of national income and it has been an engine for rising taxes. Social security now costs the average working person £15 every working day.
That is why, when I became Secretary of State for Social Security, I launched my programme of step-by-step reforms. Those reforms are having an effect. During the next three years, spending should grow by little more than 1 per cent. per annum, well below the growth in the economy, so it will be a declining share of national income. It will leave scope for sustainable reductions in taxes. That in turn is the best of all ways to stimulate activity in the economy, to create jobs and to reduce benefit dependency.
Next year, planned spending on social security will be £90 billion. That is the figure I announced last year, and it is below the plans of two years ago. The figure includes nearly £3 billion to finance increased benefit rates. That is £600 million more than anticipated last year because it is based on the September inflation rate which jumped to 3.9 per cent., and has since fallen back to 3.2 per cent.
The measures that I am announcing today will save nearly £500 million in 1996–97 and more than £1 billion in 1998–99. Together, my reforms to date will save £3.5 billion next year. By the turn of the century, they will save £5 billion a year.
To be able to help those in need, we have to stop fraud. Despite tough control on overall running costs, I am channelling extra resources to the battle against fraud. Last year the Benefits Agency detected and stopped a record £700 million of fraud, and local authorities doubled their savings to £170 million, but prevention is better than detection and I am therefore pursuing an anti-fraud strategy based on prevention and deterrence.
In total my anti-fraud measures across all benefits will save £2.5 billion by 1998–99. The Benefits Agency has just started deploying one of the most powerful data matching systems in the world to identify suspicious claims. The agency will investigate claims and carry out more than 1 million home visits and other checks. It will tackle employers who collude with people who claim unemployment benefits while working. Next year, we will start computerising post offices and launch the benefit payment card.
Local authorities have responsibility for administering housing benefit. A recent study suggests that housing benefit fraud costs almost £1 billion a year, so I shall strengthen the financial incentives for local authorities to tackle fraud. I shall invite local authorities to compete for challenge funding for innovative anti-fraud measures. Next year, I shall introduce a national computer record of housing benefit claimants. That will stop people claiming from more than one local authority.
From October 1996, further changes in housing benefit will reduce abuse and waste. Some tenants abscond without making initial payments to landlords, so I shall enable local authorities to make the first giro payable to the landlord.
Most other benefits are already paid in arrears. I shall align housing benefit with them. That will stop the wrongful payments that can arise when housing benefit is paid in advance.
In October, I announced proposals to limit asylum seekers' access to benefits. Seventy per cent. of people who claim asylum do not arrive as refugees, but make a claim some while after entering the United Kingdom illegally, or as tourists, students or visitors.
From next year, I intend to allow benefit only for people who claim asylum as they enter the UK. When a claimant is found not to be a refugee, benefit will cease. My proposals will save £160 million next year. My right hon. and learned Friend the Home Secretary is speeding up asylum decisions, which will further reduce the benefit cost. We will offer refugees a sanctuary, but we will not be a soft touch for social security.
During the past two decades, there has been a huge increase both in the number of lone parents and in their cost to the taxpayer, which is expected to reach £9.4 billion this year—equivalent to more than £1,500 a year extra tax on each working family with children of their own to support.
The right approach is neither to penalise nor to promote lone parenthood. The benefit system, however, gives special assistance to lone parents, which couples do not have. In particular, two components of benefit for lone parents have no equivalent for couples—one-parent benefit and lone-parent premium. They cost about £600 million a year.
To start bringing treatment of one-parent and two-parent families more into line, I propose no increase in either benefit next April. My intention over time is to continue to narrow the gap between the benefits that go to lone parents and those that go to couples. At the same time, I intend to build on our existing measures to help lone parents back to work.
Family credit has been of particular benefit to lone parents and I have greatly improved it. I extended family credit to people working part time, gave an extra £10 a week to people working full time and introduced a £40 a week allowance for the cost of child care. I now propose to increase that allowance to £60 a week. That will be of particular benefit to those who want to return to full-time work and those with more than one child. The provision of nursery vouchers will be an additional help to parents of pre-school children.
Maintenance is also an important stepping stone to work. Even absent parents on benefit should contribute to their child's support, so I propose to double the minimum payment of child maintenance to £4.80 a week from April next year. In addition, from April 1997, I shall pilot a major new scheme, which will provide individual help for up to 25,000 lone parents to find jobs or training opportunities.
Finally, my right hon. Friend the Secretary of State for Education and Employment will extend the very successful scheme that has already created places to care for 50,000 children out of school hours, creating a further 18,000 places over the next three years.
As a result of the reforms already implemented, the proportion of lone parents in work has increased. The four measures that I have announced today will help more lone parents to become self-supporting.
Most young people starting out in work either stay with their parents, share a flat or find a bedsit, but those who are without a job can claim housing benefit and choose to occupy a better property than they could afford if in work, so for single people under 25 who are renting privately I propose to limit housing benefit to the average cost of shared accommodation in each locality. That will reduce disincentives to work, discourage young people from leaving home before they can afford to and reduce the attraction of moving to seaside resorts. The changes will apply from next October.
Couples, people with children and those exempted from the January housing benefit changes will not be affected. Local authorities will be given funds to prevent hardship in exceptional cases.
The new scheme should save more than £100 million over three years. Last year, I announced a scheme to continue maximum help with housing benefit during the first four weeks of work. I am now extending it to people who have been on a Government training course. In a separate measure, I intend to increase non-dependant deductions for housing costs.
The state system of social security provides decent help for those in need. However, the voluntary and charitable sectors provide extra help to cope with unusual circumstances. Voluntary bodies and charities can already pay £10 a week without the recipient losing benefit. I propose to double that limit to £20 a week. I believe that the change will be widely welcomed.
I propose some smaller measures to remove anomalies. I shall amend the industrial injuries benefit scheme so that those who receive reduced earnings allowance to compensate for loss of earnings should normally transfer to retirement allowance when they reach pension age. Separately, I shall align the mobility component of disability living allowance more closely with similar benefits that are withdrawn during hospital stays. I shall improve the information gathering used to make assessments for disability living allowance.
Britain already has one of the lowest non-wage labour costs in Europe. I intend to reduce it further. From April 1996, employers will qualify for one year's remission from their national insurance contributions for each person they take on who has been out of work for two years or more.
I am cutting the national insurance class 4 contributions for self-employed people by 1.3 per cent. from April 1996. This outweighs the loss of tax relief on these contributions announced by my right hon. and learned Friend the Chancellor. Finally, I intend to cut the main rate of employers' national insurance contributions by £500 million, some 0.2 per cent., from April 1997.
One of the main financial concerns facing elderly people is the prospect of needing long-term care. Providing for their needs in old age is, of course, one of


the reasons why people save, but Age Concern and others have argued that the capital limits applying to people in residential and nursing care are tougher than the rules for people who stay in their own homes. They have urged us to raise the capital limits for residential and nursing care to those that apply to housing benefit.
We are going further than that. We are not just doubling the upper limit to £16,000 but more than tripling the lower limit. Under our proposals, people with up to £16,000 of assets will qualify for state help and people with capital of less than £10,000 will not be required to make any contribution from their capital towards the cost of basic residential care.
The new limits will apply from April 1996 at the latest to all people in long-term residential care or nursing homes. About 50,000 people should benefit in the first year. However, we also want to ensure that, in future, more people can afford care.
One of this country's major successes has been encouraging more private pension provision than any other European country. The challenge facing us now is to be equally successful in enabling people to make decent provision for long-term care. We are announcing three important proposals to stimulate the development of attractive savings and insurance schemes.
First, benefits from long-term care insurance will be tax free. Secondly, my right hon. and learned Friend the Chancellor is consulting on how occupational pension schemes can enable pensioners to defer some income early in retirement so that they have more income to help with the cost of long-term care. Thirdly, we will consult on partnership schemes that would enable people to retain even more of their assets in return for providing for a corresponding amount of their long-term care costs. That would encourage more people to make provision for themselves and it should help the insurance market to develop new products, as the risks would be limited.
Today's measures continue my step-by-step reforms of social security. I have protected the most vulnerable and I am creating a fairer and more modern benefit system, but our aim is to help more people off benefit altogether, and we are succeeding. We have fewer people out of work than any other major European country and more people in jobs.
My reforms will make a double contribution to that aim. They strengthen work incentives and encourage more people off welfare and into work. By controlling spending, they are easing the burden of taxes and helping to create a vibrant, free enterprise economy. That gives people the chance to find a job and provide for themselves, which is the best help that we can give them. It means that we can afford fair provision for those who are unable to work. My reforms give them a greater chance. I commend them to the House.

Mr. Chris Smith: I remind the Secretary of State at the outset of the background against which his statement is delivered. It is a background of rising inequality in society. Earlier this year, the Joseph Rowntree trust inquiry into income and wealth showed that inequality in income had risen rapidly between 1977 and 1990 to reach a higher level than has been recorded at any time since the second world war. In Britain, the poor are getting poorer and the rich are getting richer.
The recent report of the Organisation for Economic Co-operation and Development shows that that growth is greater in the United Kingdom than in any other advanced industrial country. The number of people who are dependent on benefit has doubled since 1979, from one in 12 people to one in six. One in five non-pensioner households has no one in work. That is the background against which the statement comes; it is the background of a divided Britain. This statement and the Budget will make those divisions worse rather than better.
The proposal to pay housing benefit in arrears rather than in advance will not only harm landlords, but make it extremely difficult for people who need to claim housing benefit in order to move into new accommodation to do so. The present situation is bad enough—deposits are sought for which no funding is available—but this change will make it even worse.
The limitation of housing benefit amounts for young people under the age of 25 will have a series of malign consequences. It will force young people out of bedsits and one-bedroom flats into inadequate, unregulated and potentially dangerous multi-occupation dwellings. It will also be particularly damaging for young people coming out of care. They are often vulnerable and already face huge difficulties—we do not need to be reminded of recent tragedies to appreciate the dangers faced by lonely and vulnerable young people.
The proposal will also create a new unemployment trap. People on existing housing benefit who take up a job that might not last very long will be faced with a lower benefit and the potential loss of a home if they lose their job. The proposal will surely act as a disincentive to people in that position taking up work. Young people face a double whammy because, for the second year running, there is an increase in the non-dependant deduction on housing benefit that is well above the inflation rate. It will provide an incentive for families to remove adult children from the family home—and that is the proposal of a party that is supposed to favour keeping families together.
On the subject of families, perhaps I might discuss the measures for single parents. Is there not a fundamental fallacy at the heart of what the Government are doing? Are not they telling us that the costs of bringing up a child or children are exactly the same for a single-parent household as for a two-parent household? It is patently obvious that that is not the case in a host of different ways, especially because the costs of child care fall to be met by one income alone. One can never rely on the unpaid help of the other member of the household if one is a single parent.
The Conservative Government used to recognise that obvious truth. The 1985 Green Paper on the reform of social security argued that one-parent benefit should be continued
as a contribution to the additional costs"—
additional costs—
faced by lone parents in bringing up children alone".
It approved the introduction of a lone-parent premium in order to recognise
the extra pressures faced by lone parents.
In 1985, the Government recognised that extra pressures and extra costs were faced by lone parents; now it would appear that they do not. What has changed in the meantime?


In the White Paper that followed that Green Paper, the Government went even further. They emphasised that
The principle of continued recognition of the need for specific further help for lone parents on top of that provided by the family premium has been welcomed.
It is that specific further help that they are now in the business of removing.
When will Conservative Members wake up to the fact that single parents are real people with real needs, and are not to be scapegoated at every turn?
Freezing lone-parent premium and one-parent benefit is bad enough. How will the phasing out happen? Will lone-parent premium be reduced year by year as family premium is uprated? Will single parents be confronted with a complete standstill in premium income as a result?
It is especially malign to attack one-parent benefit. It is an in-work benefit; it provides a through train from benefit into work. It is one of the few bits of the present welfare system that acts as a genuine bridge into work. We need to be removing disincentives that affect the move from benefit to work, not removing one of the precious few incentives that there are in the system.
I should like also to ask about the increase in minimum maintenance payments, from £2.35 to £4.80, under the Child Support Act 1991. Is not that a payment from absent parents that will frequently go straight into the pockets of the Treasury rather than the hands of the child or the caring parent? Will not many children experience no benefit from that change? Will it not also represent an effective reduction in income support for a single person, who will lose £2.45 under that measure but gain only £1.40 in the uprating? How can the Secretary of State justify his saying that a person in that position should live below what even the Government accept is the basic poverty line?
The increase in child care disregard on family credit—I must correct the Secretary of State, it is not an allowance, it is a disregard and there is an important distinction between the two—is welcome, but I note in passing that many people in real need already receiving maximum family credit will not be able to benefit from the increase in the disregard. I also note the failure to uprate any of the other disregards on housing benefit, family credit and income support.
Of course we welcome the raising of the long-term care thresholds, but is that not a very small step that leaves the great majority unassisted? The homes of many who live alone will be counted as assets, and a £16,000 threshold will surely go nowhere towards meeting their needs. Will not many thousands still live in fear of losing their homes? The Secretary of State has told us that 50,000 people will benefit from the change. Does that figure include those who may still be forced to sell their homes as a result of the current system? I must point out that the existing threshold has been frozen since 1988. Does the Secretary of State intend to uprate it regularly hereafter?
Does the introduction of a measure relating to industrial injuries in fact mean that those who have suffered an injury at work through no fault of their own will be forced out of reduced earnings allowance and lose three quarters of that benefit as a result? Will the Secretary of State also confirm that, of the cases that currently go to adjudication,

only 3 per cent. have resulted in the refusal or reduction of disability living allowance? Given that small degree of error, will the right hon. Gentleman's information-gathering exercise—of which we have been given no details—be cost-effective in any way?
We consider the Secretary of State's proposals relating to asylum seekers to be inhumane and unjust. We do not believe that they will produce any real savings, especially in view of their impact on children and local authority care costs. We will oppose the proposals. We believe that the real way in which to tackle the problem is to speed up the assessment of applications. That is obviously not happening now, given that there is a backlog of 65,000—and it is growing.
I was pleased to note that the Government are to introduce tax exemption for compensation for mis-sold personal pensions for those who were wrongly advised to leave occupational pension schemes. That is a sensible measure: it represents the equivalent of a tax-free lump sum, and thus makes fiscal sense. What bearing has that proposal, however, on the position of those who may receive payments in respect of their having opted out of the state earnings-related pension scheme, rather than an occupational scheme, and what principles underlie the Secretary of State's approach in each case?
Today we have seen yet another relaunch of the fight against fraud. That fight is, of course, desperately important: every pound of which the system is defrauded is a pound less for someone in genuine need. Indeed, the Select Committee on Social Security recently told us that the figures were grossly underestimated, but why should we believe the targets that the Secretary of State has set today any more than the unachieved targets that he has announced in previous years? Last year, savings from the fight against fraud amounted to £717 million. The Red Book tells us that savings for 1998 will be £2.5 billion. Is the Red Book figure correct? How, precisely, will the Secretary of State achieve a 250 per cent. improvement in the tackling of fraud in the course of three years?
The Secretary of State has told us that there will be extra home visits each year. Even if the number reaches the 1 million home visits that the right hon. Gentleman anticipates, that figure will bring us barely above the 800,000 figure of 1989, and nowhere near the 6.6 million that took place in 1979. It is all very well to ring-fence special officers for fraud investigation, but should not every single member of DSS staff be part of the battle against fraud? If the administrative cost of the rest of the Secretary of State's Department is being squeezed, will that not damage the overall effort?
What about the level of errors? We know from the Comptroller and Auditor General's report that, in the last recorded year, £540 million was lost through departmental error in income support payments alone. Will not that be made worse, not better, by what is proposed in the statement? Will the Secretary of State now commit himself to implementing in full the Select Committee's recommendations on fraud?
Is not the statement just another example of the Government's approach to social security: not an overall coherent approach, just a piecemeal look, benefit by benefit, target group by target group—what can we take off mortgage payers or the unemployed one year and off young people and single parents the next? Surely the real way to set about reforming the welfare system and


reducing the overall budget is not to harm the people concerned with benefit cut after benefit cut but to look at the system as a whole and put in place real measures to help them come off welfare and into work.
The statement showed precious little of the Chancellor's boasted social conscience. It has not protected the vulnerable. It does not come anywhere near a coherent benefit-to-work strategy. It deepens the divisions in a divided Britain. It is time for the Government who have created those divisions to go.

Mr. Lilley: How things have changed since the hon. Member for Glasgow, Garscadden (Mr. Dewar) was replaced by the hon. Member for Islington, South and Finsbury (Mr. Smith). The former was always careful to leave us entirely confused as to whether he was supporting or opposing what we had suggested. There is no doubt today that Labour has opposed every measure that we have introduced. The hon. Member for Islington, South and Finsbury has just chalked up a bill of £1 billion of savings forgone. How the Labour party can honour, "Vote in favour of our tax cuts" while opposing our savings remains to be seen. It is old Labour with a vengeance.
The hon. Gentleman began by referring to the Joseph Rowntree trust report. He clearly has not read the subsequent Institute for Fiscal Studies report which showed that, far from the poor getting poor and the rich getting richer, the poor have also got richer in the sense that the bottom 10 per cent. spend substantially more now than they did in 1979, and a high proportion of them move each year to higher deciles in income distribution.
The hon. Gentleman criticised our measures to restrict housing benefit for the under-25s to the sort of accommodation that most people who are paying for their housing when in work choose to occupy. I cannot see the logic of his position there.
The hon. Gentleman was worried about the danger of properties in multiple occupation. The answer to that is proper regulation and enforcement, not to try to manipulate the benefit system, which already leaves many people in such properties.
The hon. Gentleman referred to the difficulties that young people might have getting back to work. He clearly does not understand the run-on scheme, which I announced last year and which is being introduced from April. It will allow people to keep, for four weeks after returning to work, the maximum housing benefit even though they are in work and may no longer be entitled to it. That will be a major help for young people and others returning to work. There will, of course, be special provision for the more vulnerable groups, as there is in the changes that begin in January.
The hon. Gentleman does not seem to recognise that
For decades politicians would not talk about the issue. Tax and benefit policy was squeezed to help single parents and childless couples. Single parents gained more help than did two parents. That policy has got to be reversed.
Those are the words of the Chairman of the Social Security Select Committee in September this year, and I agree with him.
The hon. Gentleman does not seem to realise that one-parent benefit, when it was originally introduced by Barbara Castle—as both the Chairman of the Select Committee and Barbara Castle herself made clear—was

never part of any strategy. It was merely an attempt at a quick fix. Barbara Castle said that it was an interim benefit for the one-parent family "for a year" and that it would cease when the child benefit scheme came into effect.
The hon. Gentleman argued that one-parent benefit is necessary as a work incentive. Since we are treating lone-parent premium—which is the counterpart to the out-of-work benefits—in parallel with one-parent benefit, there is no problem with any change in work incentives. We believe that the right approach is to encourage people back into work. We are doing that by increasing the child care disregard and by the range of other measures that I have announced today. Indeed, I calculate that the expansion of nursery care vouchers will almost cost more than the savings that we are achieving initially from our lone-parent measures. Once again, the Opposition would not be able to finance desirable schemes because they refuse to make the savings necessary for them.
The hon. Gentleman was completely silent on what Labour proposes to do about long-term care. He hinted that the Labour party was proposing to spend billions of pounds more of public subsidy. We believe that it is right to try to achieve as much success in enabling people to finance long-term care as we have had enabling them to finance decent pension provision. That is the burden of the various measures that the Chancellor and I are introducing.
The reduced earnings allowance, as its name suggests, is a compensation for people who have suffered injuries that have reduced their earning capacity. The allowance is intended to apply to people during their working lives. Because of some anomalies, it does not stop for all people when they reach retirement age. We are trying to ensure that, in the majority of cases, the allowance will stop and be replaced by the retirement allowance, which is appropriate in retirement.

Mr. Smith: When they have less income.

Mr. Lilley: Of course most people have less income when they retire than when they are at work, but they none the less get some compensation through the retirement allowance to acknowledge the fact that they have been able to make less provision during their working life because of the industrial injury.
A fair structure of benefits has been agreed by Parliament and we are now trying to implement that properly through regulations.
The hon. Gentleman says that all we should do for asylum seekers is to speed up the process. The Home Secretary is doing a great deal to that end. I understand that the Opposition are opposing the measures that would enable my right hon. and learned Friend to speed up the process. As long as we are a honeypot attracting people for benefit reasons, we will find it impossible to give proper consideration to the genuine refugees who reach our shores—whom we all want to help.
I am not surprised that the hon. Gentleman chooses to try to ridicule the changes that have been made to assist detection of fraud. He said that our previous targets have not been achieved. He is wrong. Our target for the current year was about £648 million of fraud detected and stopped by the Benefits Agency. The actual figure was £717 million, just by the Benefits Agency. Fraud savings have also been made by local authorities and by the


Employment Service's fraud department, which has now merged with my Department. That is why there is an apparent disparity in the figures that the hon. Gentleman quoted.
There will be a substantial increase in the fraud savings because of the extra resources that I have devoted to it and the strategy that I am pursuing, which the Labour party appears to oppose. I remind the hon. Gentleman that the hon. Member for Sheffield, Brightside (Mr. Blunkett) has said that Labour has too long been associated with the freeloaders.

Several hon. Members: rose—

Madam Speaker: Order. That initial exchange has taken 37 minutes. I must now insist that hon. Members put brisk questions. I equally insist on brisk answers because we have other business to conduct in the House today.

Sir Andrew Bowden: I welcome the announcement on long-term care. Will my right hon. Friend enlarge a little on partnership schemes? Does he foresee those schemes including the ability to purchase a room in a residential home or some sort of equity in a residential home so that a person who moves into a home can retain some capital for his or her family in the future?

Mr. Lilley: My right hon. Friends and I will issue a paper to consult on the possibility of proceeding with partnership schemes. It would be wrong to speculate now on the full extent of them, but I note the point that my hon. Friend has made. I know of his great interest in this matter and I am sure that we shall receive helpful and extremely well-informed contributions from him once the proposal is in the public domain.

Mr. Simon Hughes: My question, too, is about how the Secretary of State's announcement affects older people. Why has not he altered the insulting additional 25p payment for over-80 pensioners, which has remained in place for so long? Why, after 23 years, has he still not adjusted the Christmas bonus, which remains at £10? Was not the Chancellor's residential care announcement yesterday a giveaway, as it increased capital allowances? Will not we have a takeaway from the Secretary of State for the Environment tomorrow when he announces that local authority funds will be cut? Is not this an attempt at a getaway by the Secretary of State for Social Security because he is not increasing the special transitional grant for community care?

Mr. Lilley: I can answer that question briskly. Unlike the Opposition, we are in serious government and cannot afford to hand out money like confetti.

Mr. Tim Smith: May I congratulate my right hon. Friend on the meticulous and patient way in which he has carried out his comprehensive review of social security spending since 1992? What would total spending have been if none of the changes had been made, and what would have been the cost to the taxpayer?

Mr. Lilley: I am grateful to my hon. Friend. If none of the changes had been made, expenditure next year would have been about £3.5 billion higher than it will be; by the

end of the century it would have been £5 billion higher; and in the next century it would have been three times that figure—nearer £15 billion higher.

Mr. Frank Field: As every statement by the Secretary of State is incomplete until he has announced new anti-fraud measures, when does he expect to have an adequate anti-fraud programme in place? When will it be safe for taxpayers to trust him with their £90 billion contribution?

Mr. Lilley: We can make greater progress than any previous Government because of our benefit reviews, which enable us to identify, measure and investigate the different kinds of fraud. Those reviews are taking place benefit by benefit. Provisional results from the review of housing benefit show a substantial amount of fraud there. That information enables us to carry forward anti-fraud measures against housing benefit with local authorities. I imagine that the other benefits are likely to show a lower level of fraud. The answer to the hon. Gentleman's final question is that there is greater security with this Government, and me in charge of the anti-fraud campaign, than there would be with anyone else, with the possible exception of the hon. Gentleman.

Mr. John Townend: Will my right hon. Friend accept my congratulations on all the savings that he has made? I am slightly mystified, however, in view of the great number of savings that he has outlined to the House, that page 126 of the Red Book shows that social security spending has gone up, compared with plans for 1996–97, by £1,040 million and that, for 1997–98, it is proposed that the increase from previous plans be a further £550 million.

Mr. Lilley: I am grateful to my hon. Friend. I think that I can help him with the figures. They refer to the control total, which forms only part of the actual total and excludes all cyclical benefits in my Department. Offsetting savings have been made in some areas of cyclical benefits, which are not included in the control total. We excluded cyclical benefits because we thought that it was right to let the cyclical effect of increased spending occur during the recession and be fully financed by extra taxation. As I said this morning, only two things drive up taxes—recession and a Labour Government. We are coming out of recession; let us ensure that we do not have a Labour Government. We can then be certain of sustained lower taxes.

Mr. Terry Rooney: The Secretary of State will be aware that one of the greatest areas of fraud is among corrupt employers who work in the black economy. Why has he cut Contributions Agency field inspectors by 60 per cent.?

Mr. Lilley: I said in my statement, quite contrary to what the hon. Gentleman says, that with the integration of the Employment Service fraud officers and my Benefits Agency staff, there will be a special effort to crack down on collusion between employers and employees. I am glad to have the hon. Gentleman's support for that.

Mr. Peter Luff: In my constituency and around the country the elderly and those approaching retirement will welcome the measures that my right hon. Friend has announced for long-term care and those that my right hon. and learned Friend the Chancellor


announced yesterday about tax on savings. Will my right hon. Friend continue with research to find ways to reward rather than penalise those who have been prudent enough to prepare for their old age?

Mr. Lilley: I am grateful to my hon. Friend for his welcome. He is right to say that, going beyond the measures that I have announced and including those announced by my right hon. and learned Friend the Chancellor, this is a Budget for everybody but specifically for the prudent and the elderly. We think that those who are prudent enough to save for retirement should be encouraged to do that, hence the lower tax on savings, measures to promote investment for long-term care and the recognition of the comparative harshness of the previous capital rules.

Mr. Dennis Skinner: Does the Secretary of State recall that in the past few weeks, the nation has been aghast at the stories, emanating from around Gloucester and elsewhere, of young women in particular roaming the streets and being picked up by Rose and Fred West? By proposing to take away some of the housing benefit from under-25s, he will create a situation in which thousands of young people will be roaming the streets. Any decent Government would withdraw that proposal. If he wants to do something about high rents, he should tackle the landlords—his friends.

Mr. Lilley: Even by the hon. Member's standards, that is a distasteful attempt to exploit a ghastly tragedy for party political ends. We propose to continue housing benefit for the under-25s but to restrict it to the level that is payable for shared accommodation. That is only right and proper. A number of the measures that we have announced will prevent abuse by both landlords and tenants.

Mr. Bernard Jenkin: Is it not disturbing that total spending on social security is still rising despite all my right hon. Friend's efforts to curb it? Does not that demonstrate that, unless we continue to reform social security and tackle fraud, the burden will continue to rise and threaten the country's prosperity?

Mr. Lilley: I agree that further work needs to be done. I spelt out that there would be a step-by-step, sector-by-sector review of social security. That is the way in which we have approached it. None the less, it is worth noting that the average growth- in real terms of social security spending over its first 50 years was 5 per cent. a year, while over the next three years it is expected to be a little over 1 per cent. That is a major change, and this must be one of the very few countries in the developed world that can expect social security to take a declining proportion of national income in the years to come, thereby reducing taxes and the burdens on creating jobs.

Ms Angela Eagle: Given that the Government have admitted that lone parents face extra costs, can the Secretary of State explain why the children of lone parents should be made to suffer because of the marital status of their parents, which after all is not their fault?

Mr. Lilley: Lone parents receive extra money relative to couples in a number of ways and not just through lone-parent premium and lone-parent benefit. The lone parent receives £10 a week more in her or his personal

allowance than when she or he was part of a couple. That reflects the greater cost of living alone. There are a number of other changes, the most important of which is the introduction of family credit. It is heavily weighted to the benefit of lone parents and has significantly increased the chances of lone parents returning to work. We must build on that.

Mr. Nick Hawkins: The measures announced by my right hon. Friend will certainly be welcome in many seaside resort constituencies, not least because of the help that he has announced for those who are in long-term care, his raising of capital limits and his continuing support for the most vulnerable pensioners. Is he surprised to know that, contrary to what the hon. Member for Bolsover (Mr. Skinner) said, Labour councillors in many seaside resorts own and run houses in multiple occupation and benefit as unscrupulous landlords? That is the record of Labour in power.

Mr. Lilley: My hon. Friend speaks with great knowledge of this matter and I am sure that his remarks will bite home among Opposition Members. I am grateful to him for his welcome, and I know that the measures that I have announced will be well received not just in Blackpool but in many other seaside and inland resorts.

Mr. Alan Howarth: What assessment has the Secretary of State made of the cost to public expenditure of his decision to cut the value of lone-parent benefit, thus making it harder for lone parents to be in work? What assessment has he made of the effect of reducing the lone-parent premium which, through impoverishing households, means that more children are likely to be taken into care? On what evidence does he justify his decision to erode lone-parent premium which was introduced by his predecessor in 1988 in recognition of the additional costs and pressures faced by lone parents? Why does the Conservative party insist on stigmatising lone parents?

Mr. Lilley: That is nonsense, as my hon. Friend—well, he is a friend, though not in the technical sense that he was before—used to know. The hon. Gentleman is talking absolute nonsense. We are moving lone-parent premium and one-parent benefit in parallel and there is thus no change in work incentives. We are simultaneously improving rewards for work through changes to family credit, making it available to part-time workers, increasing its value for full-time workers and covering more generously the cost of child care. He should recognise and welcome those changes. When he has considered them, perhaps he will review which side of the House he should sit on.

Dr. Robert Spink: In welcoming my right hon. Friend's reduction, albeit marginal, in non-wage labour costs, may I ask him to resist Opposition policies that would increase not just non-wage labour costs through the adoption of the social chapter but direct labour costs because of the minimum wage? That would happen at all salary levels because the policies advocated by those on the Opposition Benches would put people out of work.

Mr. Lilley: Far more important than anything that we can do directly to improve the benefits system are measures that increase the number and availability of jobs for those who would otherwise depend on the benefits


system. We have been more successful than our counterparts in Europe in getting unemployment down and getting people into work. We have about 68 per cent. of people of working age in work. On the continent the average is 60 per cent. If we had the same average as that on the continent, which the policies of the Opposition might well achieve, there would be 3 million fewer people in work in this country. That is a measure of how important it is to stay out of the social chapter and continue to reduce taxes and the costs of creating jobs.

Ms Roseanna Cunningham: Does the Minister recall the warnings prior to the removal of benefit for 16 and 17-year-olds that its abolition would simply result in an increase in homelessness? Does he not understand that because of that there is widespread support for the restoration of that benefit, particularly in Scotland? I am happy to say that my party is in favour of that. Does he not understand that there will be further widespread revulsion at the cuts in housing benefit because they are likely to lead to yet another increase in homelessness? People will be afraid that instead of seeing a "Big Issue" vendor on every street corner they will see one in every doorway as a direct result of the Government's policy.

Mr. Lilley: I understand that the Opposition think that the working of the rules that we introduced to remove automatic entitlement to benefit from 16 and 17-year-olds and instead give guaranteed training places should be extended to everybody under the age of 25. Therefore they have found evidence opposite to that of the hon. Lady, or at least the hon. Member for Dunfermline, East (Mr. Brown) finds the opposite sort of evidence because he thinks that young people under 25 should have benefit removed if they do not fulfil his edicts. However, I gather that that view is not universally shared by his Front-Bench colleagues.

Mr. Anthony Coombs: Does my right hon. Friend agree that, in my constituency, few things annoy thrifty pensioners more than seeing young people touring the country on virtually unlimited housing benefit? Does he therefore agree that those pensioners will welcome the idea that there should be a limit to the costs of housing benefit on the basis of locally shared accommodation for under-25s? How will that be calculated?

Mr. Lilley: I am grateful to my hon. Friend for his welcome. The proposal is that the structure set in place by the January changes, under which rent officers will assess the average reference rent for each type of property in each region, will apply to shared accommodation. Rent officers will set a reference—effectively, the average level of such properties in each locality. That will be the maximum to which people under 25 will be entitled to claim housing benefit.

Mr. Jeff Rooker: Why is it possible, even after this statement, for a landlord owning and renting property and receiving an income to receive housing benefit personally? Why do not the same capital disregard rules apply to that landlord as apply to elderly people who may, even after the statement, have to dispose of their property to go into care? Why do we featherbed

landlords so that they may obtain housing benefit? The Secretary of State looks so surprised: he does not even know about it.

Mr. Lilley: The hon. Gentleman might be right. He might have found something that I did not know about, in which case I shall be only too happy learn, but I am not sure that there is any such rule as he suggests, unless he is merely saying that landlords receive rent paid from housing benefit, which of course they do. If they did not, they would not rent out their properties to people on housing benefit. We could discuss that matter afterwards. I would be only too happy to become better informed on that matter.

Mr. Tam Dalyell: What is the estimated cost to the Treasury, to the nearest £5 million please, of making benefits from long-term care insurance tax free'? There must be a notional sum in the brief somewhere.

Mr. Lilley: There must be but, that being a tax matter, it is not a figure that I carry in my head and no Treasury Minister is within earshot, so I shall have to write to tell the hon. Gentleman what the number is. [HON. MEMBERS: "It is in the Red Book."] It may well be in the Red Book, but I am sorry—I cannot give the figure to the hon. Gentleman off the cuff.

Mr. Harry Barnes: One of the Government's objectives is to get rid of inheritance tax. One of the few elements that many pensioners hold that could be an inheritance in future is their homes, which they are proud of, but which are small and would not bring much on the market. They could bring more, however, than the £16,000 that the Minister has mentioned within the changes, if they take place. Will he not consider protecting the inheritance that elderly people have, so that it is not ripped off by people in private nursing homes?

Mr. Lilley: As I mentioned, and as the Chancellor mentioned yesterday, we are considering schemes whereby people would be able to protect an additional element of their capital by making prior provision for a certain amount of long-term care costs. If they have to activate that and spend that money, or the insurance company on their behalf has to spend that money, there will be a corresponding increase in the capital limit applying to them—that is the rough structure of the proposal. We are open to discussion about how it should work in detail, but it is precisely the sort of thing that the hon. Gentleman suggests his constituents would like, and I am sure that, as a result, they will be voting Tory.

Mr. Paul Flynn: Will the Secretary of State instruct his anti-fraud staff to read his statement today to discover whether it is fraudulent to deny any increases on 30 benefits, including the widow's payment, which is £1,000, but would be £1,881 if it had been increased along with earnings'? Will he include in the Official Report a full statement on all benefits that have not been increased today? Some of them have never been increased. They replace benefits that were increased by inflation. Will he explain his reasons for freezing them?

Mr. Lilley: If all benefits had been uprated in the way in which the hon. Gentleman suggests, the cost would run into billions. Like the hon. Member for Southwark and Bermondsey (Mr. Hughes), he belongs to the confetti


tendency of public expenditure. Any responsible party or Government simply cannot do all the things that he would like to do.

Mr. Jeremy Corbyn: Will the Secretary of State consider that his naked appeal to the xenophobia of the Tory party has brought us the habitual residence test and all the misery that goes with it? He now proposes to take benefits away from asylum seekers from next year. Bearing it in mind that Britain has fewer asylum seekers than any other European country and the lowest number of acceptances, he is appealing to the racism of his party. His proposals will lead to destitution among people who are fleeing oppression.

Mr. Lilley: With respect, this is not a racial issue, but a benefits issue. The people who play the racial card are those who want to divide for their own reasons. That is monstrous and irresponsible. We believe that it is not right that people who enter the country as tourists, business men or other types of visitor on the understanding that they will not be a burden on public funds, who have been here for some while and who decide, typically when their visa runs out, to lodge a claim for asylum, should become entitled to benefits. As for the treatment of asylum seekers who have had their claim rejected by the Home Office, we treat their right to benefits during the period of appeal on the same basis as we treat the right of British citizens who appeal against refusal of benefit. Far from being racist, therefore, we are putting people on an equal footing.

Madam Speaker: We now come to the statement by the Secretary of State for Scotland.

Mr. Dalyell: On a point of order on this statement, Madam Speaker.

Madam Speaker: I cannot take a point of order at this stage. Other hon. Members are waiting to hear the statement and it is usual for points of order to be taken at the end of statements.

Scotland (Government)

The Secretary of State for Scotland (Mr. Michael Forsyth): With permission, Madam Speaker, I should like to make a statement about the government of Scotland.
Scotland has prospered under this Conservative Government. The economy has been transformed, unemployment is at its lowest for 15 years, and inward investment is booming.
The foundation of Scotland's economic success is the constitutional stability guaranteed by the Union—Opposition Members are meant to cheer at that point. The Union is not a dry legality; it is much greater than the sum of its parts. It is a constantly growing and living relationship, in which we must all continue to invest. It is strengthened by devolution for people, not for politicians. That means devolving power downwards from central Government, through local authorities, to community councils, school boards, housing associations and all other representative local groups, and ultimately to families and individuals.
The Government utterly reject a tax-raising Parliament that would damage Scotland's jobs and prosperity. We have long recognised that Westminster and Whitehall can seem remote from the people of Scotland. After all, it was a Conservative Government which established the office of Secretary for Scotland and the modern Scottish Office. As we made clear in the White Paper "Scotland in the Union", we believe that the correct approach is to work within the existing, successful framework of the Union to make Government and Parliament at all levels more visible and relevant to the people.
The expanded role recently created for the Scottish Grand Committee has been helpful both to Scottish Ministers and hon. Members, and to the business of the House in general. It has been extremely well received in Scotland, where the Committee's sittings north of the border, most recently in Aberdeen, brought Parliament to the people, making for better government.
My right hon. Friend the Prime Minister said in 1993 in his foreword to "Scotland in the Union" that the White Paper was not the end of the story, but part of an on-going process. He said:
Our search for new ways to strengthen the Union will go on. We stand ready to take account of changing circumstances. And our drive to strengthen Scotland's place in the Union—and thus the United Kingdom itself—will continue.
It is in accordance with that commitment that I have been working with my right hon. Friend the Prime Minister and my other right hon. Friends. I want to tell the House today of important changes that we propose to the way in which legislation is handled and Ministers called to account.
We believe that it is right to debate the Second Reading of Scottish Bills in a Scottish forum, and so to increase the involvement of the Scottish people in the process. We intend that, from now on, Scottish Bills coming to the House should have their Second Reading in the Scottish Grand Committee sitting in Scotland, whenever it makes sense that that should happen.
The other key stage of consideration of principle is the Third Reading. We believe, in such cases, that that too should be debated in the Scottish Grand Committee, so that people can see what is being done at the stage of


commitment to the approval of the Bill after the processes of detailed consideration and amendment. The technical processes will be essentially similar to those already in place for Second Reading.
Making greater use of the Scottish Grand Committee in that way will mean that we can expand the Scottish legislative programme. As an example of the potential that that provides. it has been possible this year to add the Licensing (Amendment) (Scotland) Bill—[Laughter.] I am glad that hon. Members find a Bill to tackle the problem of drug misuse at raves amusing; I happen to think that it is central to our legislative programme.
Secondly, we want to use to the full the procedure under which, before Scottish Bills embark on their Committee stage, evidence can be taken by a Special Standing Committee meeting in Scotland. That was done with the Children (Scotland) Bill last Session, and was very successful. It is suited to uncontroversial Bills, and is especially relevant to Scottish circumstances.
There is in Scotland a range of professional bodies and other well-informed interest groups that have less access to the Westminster process than do their counterparts in England. The use of a Special Standing Committee gives such people an opportunity to make a key impact at a formative stage of the process.
I am pleased to be able to say in addition that my right hon. and noble Friend the Lord Privy Seal is actively pursuing the possibility of establishing a new procedure in another place, to allow evidence to be taken in Scotland for Scottish Bills that are introduced in the House of Lords. It is our hope that that approach may be followed in the first instance for the Deer (Amendment) (Scotland) Bill, which was published last week.
I turn now to the way in which Ministers are called to account. [Laughter.] Another advantage in the new procedure will be the fact that people in Scotland will be able to see how the Opposition behave. The Scottish Grand Committee already has the opportunity to call to account the Secretary of State for Scotland and other Ministers at the Scottish Office. But the business of government in Scotland is not the responsibility of the Secretary of State alone.
Many of my right hon. Friends have responsibilities and take decisions on a daily basis that impact directly on the people of Scotland; so it is only right that they too should have to explain to the Scottish Grand Committee in Scotland why particular policies are being followed, and the benefits that they will bring. I therefore recommend to the House that we should change Standing Orders to achieve that.
The importance of the innovation should not be underestimated. It offers the opportunity of adding a completely new dimension of accountability for Government business in Scotland, with the Prime Minister, the Deputy Prime Minister, the Chancellor of the Exchequer, the Secretary of State for Social Security or the Secretary of State for Defence, for example, taking part in debates in Scotland and being able to present policies and react to criticisms of them; and it will all be done in a forum accessible to the people of Scotland.
Additionally, the provisions that already allow Scottish Office Ministers in another place to make statements to the Scottish Grand Committee will be extended to include all Ministers in another place.
We shall bring the new Standing Orders forward for approval shortly. To ensure that the process can be planned properly, we shall need a timetable for sittings throughout the year. I am today tabling motions for eight meetings of the Scottish Grand Committee to consider Government business, and two meetings to consider Liberal Democrat party and Scottish National party business, all of which will be held in Scotland.
As soon as the Labour party has made up its mind where it wishes the meetings to consider its business to be held, and on what dates, we shall agree through the usual channels the full programme for the Committee, and a motion will be put before the House for approval. It will provide for the Scottish Grand Committee to meet much more frequently in Scotland, and I intend that that should involve more places in Scotland. I am delighted to tell the House that, provided that the relevant changes to Standing Orders are approved, the Prime Minister and the Chancellor will take part in the Grand Committee debates in Scotland in the new year.
To sum up—[Laughter.] To sum up—

Mr. George Robertson: Is that it?

Madam Speaker: Order. The House must come to order. [Interruption.] If hon. Members seek to ask questions later, they had better come to order now.

Mr. Forsyth: The hon. Member for Hamilton (Mr. Robertson) knew precisely what I intended to say, because I gave him a copy of my statement in advance. He knew exactly what was being proposed, which is why his laughter was not quite co-ordinated with the statement.
To sum up, the changes that I propose will greatly strengthen the role of the Scottish Grand Committee in considering legislation affecting Scotland, and will provide for an expanded Scottish legislative programme that will be examined in Scotland in ways that should produce better legislation, and involve the people of Scotland.
The proposals will provide a new focus for the role of the Scottish Grand Committee in scrutinising and calling to account not just Scottish Office Ministers but every Minister. The Scottish Grand Committee will thus assume an increasingly pivotal role in the parliamentary government of Scotland, in bringing Government closer to the people, and in underpinning the Union.
What the people of Scotland want is Government close to them, Government listening to them, and above all, Government accountable to them. This historic Parliament embodies our great Union. It is the only Parliament that can effectively and powerfully secure Scotland's interests and future.
The changes represent a significant step forward. They must be seen in the context of our plans to devolve power to local government, to create a new forum based on the Scottish Economic Council, and to give the people of Scotland more control over their own lives. The Government stand four-square behind the Union, and thereby behind Scotland and her people. I commend the proposals to the House.

Mr. George Robertson: The statement was a stark admission that the Government's policies towards Scotland have utterly failed. The whole speech was a confession that, for the past 16 years, the Conservative


party has got the government of Scotland wrong. The "do nothing" policy of the Government has now been replaced by the "do as little as possible" policy. First we had "Taking Stock"; now we have taking the michael.
Did that statement really represent the full breadth of the Secretary of State's vision for his country? New Forsyth, new status quo? Is that the Secretary of State's really big idea—weekend breaks and awayday trips for the Cabinet, from the grouse moor to the Grand Committee? Will the Secretary of State confirm that that was really his best shot, and that after all the hype, the build-up and the publicity, it is the best that he could come up with?
The Secretary of State told the press the other day that, when he drew up the changes, he had started with a blank sheet of paper. Obviously he did not get much further than that, because today's long-awaited package is even more of a let-down than the new Beatles single.
Will the right hon. Gentleman admit that his revamped Scottish Grand Committee will be little more than a rubber stamp for non-controversial legislation? In that case, what has really changed? The Scottish Grand Committee can already deal with non-controversial legislation, as it did last Session with the Children (Scotland) Act 1995. We facilitated that Act's passage on to the statute book. Indeed, the Secretary of State can always expect co-operation from Opposition Members where consensus exists.
I ask the right hon. Gentleman again: what has really changed, other than the fact that there will be an extra stage for Scottish Bills and a few more meetings, debates and opportunities to hear Ministers and their reinforcements desperately recruited from the Cabinet dodge even more difficult questions?
My hon. Friends and I welcome the opportunity of more debates with the Secretary of State and his colleagues. I look forward to exposing the Government's betrayal of Scotland, wherever the debates take place. Does the Secretary of State not realise that this travelling circus is no substitute at all for a Scottish Parliament, elected by, and responsible to, the Scottish people?
Is it not true that the proposals will mean that not a single extra decision will be taken by Scotland's Members of Parliament, and that the so-called new Scottish Grand Committee will continue to be no more than a toothless talking shop, with no real powers to change Scotland for the better?
To get down to the specifics of the statement, what about the Third Readings in the Scottish Grand Committee? Will the Secretary of State confirm that decisions on Second and Third Readings taken in the Grand Committee will not stand, but that they will simply be on procedural motions that can be overturned by a Tory majority on the Floor of the House?
Since that is the case, will that not be yet another worthless trick, offering nothing beyond the present position, in which no real decisions can be taken in this tarted-up Scottish Grand Committee?
I should like to put the real acid test to the Secretary of State. Will the Scottish Grand Committee decide on the issue of nursery vouchers for Scotland, as was promised in the Scottish Office press notice which described his education Bill in the Queen's Speech? Or is he simply

going to sneak through this unpopular, unwanted intrusion into Scotland's education system by some statutory instrument or by adding it to the English Bill?
I tell the Secretary of State this: if Scotland's representatives will not be able to make decisions on such legislation, his reforms will be simply worthless. The people of Scotland are not going to be bought off with a few more powers for local government, a few more debates in the Grand Committee, or some beefed-up old quango. That is not real devolution: it is simply a con trick—nothing more and nothing less.
The unity of this country, which we value as much as any Conservative, will never be guaranteed by cosmetic, panic-driven gimmicks that arrogantly insult the intelligence of the Scottish people. The people of Scotland want a Scottish Parliament, and nothing less will do. Only a Labour Government will deliver that to them.

Mr. Forsyth: I do not know whether the hon. Gentleman cleared his lines with the right hon. Member for Sedgefield (Mr. Blair). Is he advancing a proposition that a Scottish Grand Committee should be able to pass legislation without the approval of this House, which is what it sounded like he was saying? Is that his position? The hon. Gentleman was implying that that was his position.
Can we take it, then, that it is the Labour party's position that, under a Labour Government, an English Grand Committee, for which there are provisions in our Standing Orders, would be able to pass legislation without the consent of this House? The hon. Member for Hamilton is nodding his head in agreement. I had no idea that he had jumped so far into the nationalist camp. He is supposed to be a Unionist politician. He speaks the language and the policies of nationalists.
We Unionists believe in the sovereignty of this House. The proposals that we have put forward are to strengthen the Union, to hold Ministers who are accountable to the House accountable within Scotland.
The hon. Member for Hamilton asked how accountability will be strengthened. If he thinks that senior Ministers having to go to Scotland to debate issues will not result in their Departments having to wake up rather more to the Scottish dimension, he has even less experience and understanding of government than I imagined.
I ask the hon. Member for Hamilton to solve this puzzle: why is he so opposed to the proposals? Imagine for a moment—it is a big thought; an impossible thought—a Labour Government and their having a majority in the Grand Committee with its proposed powers. They could take legislation through the Grand Committee, through all its stages. They could win votes, because they would have a majority. Indeed, they could do everything in the Grand Committee that they could in a Scottish Parliament, and more. The only thing that they would not be able to do is raise taxes in Scotland, and make the Scots pay a tartan tax. In addition, they could hold the Prime Minister to account.
Writing in the Evening Times, the Leader of the Opposition was quoted as saying:
I look forward to the day when, as Prime Minister of the United Kingdom, I will be able to visit a Scottish Parliament working to improve life for the people of Scotland".


Our proposals mean that the Prime Minister will not visit a Scottish Parliament—he will go to Parliament in Scotland and will be held to account by this House.

Mr. Allan Stewart: May I congratulate my right hon. Friend first on his practical and innovative Unionist package, and secondly on smoking out the hon. Member for Hamilton (Mr. Robertson) as the crypto-nationalist we always thought he was?
Will my right hon. Friend develop the point that he has just made? What on earth could a Labour Scottish Parliament actually do which, under his proposals, a Labour Government, sitting here, could not in any event do, except impose additional taxes on the people of Scotland over and above the taxes imposed on the people of the United Kingdom? Surely the hon. Gentleman has failed to answer that question.
Could we have the first meeting with the Prime Minister in that well-known Unionist citadel of Eastwood?

Mr. Forsyth: I shall bear in mind my hon. Friend's bid. I hope that towns and cities with suitable premises with which the House authorities are satisfied will bid for the Grand Committee to come into their communities. I am sure that that would be a desirable step forward. My hon. Friend is absolutely right. All that the Scottish Parliament will be able to do is raise income tax by 3p in the pound and make the people of Scotland pay more tax than that paid in England—and in Wales, because Labour's proposals for a Welsh Assembly do not include tax-raising powers. We have to have a tartan tax, but no Taffy tax, which seems to be deeply unjust.
Of course a Scottish Parliament will not be able to decide the level of the Scottish Office budget. That will be decided here in Westminster. Indeed, hon. Members on the Liberal Bench have already conceded that we would have fewer Scottish Members of Parliament and no Secretary of State. So who will speak for Scotland when the money is decided?

Mr. James Wallace: People in Scotland, and, indeed, the Secretary of State's fellow Cabinet members, will notice that, a few moments ago, the right hon. Gentleman conceded that many UK Departments were not fully awake to the needs of Scotland when dealing with legislation.
Will the Secretary of State confirm that, when the Prime Minister was on his soapbox before the election defending the Union, he had in mind that to do so would require an awayday ticket to attend meetings of the Scottish Grand Committee in Scotland? Will he answer the question that he has already been asked: whether education vouchers policy will be subject not only to the Scottish Grand Committee's deliberations but to a vote?
The Secretary of State has said that Ministers will be able to go to Scotland to present policies and react to criticisms of them. Will he confirm that there is nothing in his proposals that says that Ministers will change those policies in the light of Scottish opinion?

Mr. Forsyth: Of course we will take account of Scottish opinion. I am quite prepared to discuss through the usual channels which Bills have their Second Reading

in the Scottish Grand Committee. In fact, the provisions which require legislation concerning nursery vouchers are, for example, to secure inspection, which the hon. Member for Monklands, East (Mrs. Liddell) has been going around Scotland saying is essential for nursery vouchers. So I am surprised that hon. Members are contemplating the prospect of voting such things down.

Mrs. Helen Liddell: Is it to be a statutory instrument?

Mr. Forsyth: The hon. Lady asks from a sedentary position whether it is a statutory instrument. The answer is no. In fact, we do not require legislative powers at the present time in order to pay grants directly to parents. But we will make provision in the legislation, and when it is published, Members will be able to discuss it. We can discuss whether that can be dealt with through the Scottish Grand Committee.
I would certainly welcome the opportunity of scrutiny in Scotland, so that every parent with pre-school children would know that dogma dictates that Labour Members do not want them to get £1,100 in vouchers to choose the nurseries of their choice; that they, the socialists on the Opposition Benches, would much rather decide for parents what is good for their children.

Sir Hector Monro: I have attended Scottish Grand Committees for many years under many Governments. Does my right hon. Friend agree that it is good news that we will have real purpose in the future, and that our opportunity to consider legislation and to cross-examine will be extended? Does he agree that attendance by my right hon. Friend the Prime Minister and other Cabinet Ministers in Scotland for cross-examination will enhance the reputation of the Scottish Grand Committee? Does he agree that that is in stark contrast to the proposals of the Labour and Liberal parties for an assembly in which there will be no Secretary of State for Scotland and no one to look after our interests in the Cabinet?

Mr. Forsyth: I agree with my right hon. Friend: he is right. The Scottish Grand Committee is not a Scottish Parliament. It cannot impose tax on the Scots over and above what people pay in England. It is not a Parliament that would mean that people were taxed more because they worked in Scotland than people in any other part of the United Kingdom. It has none of those powers. I make no apology for that. As my right hon. Friend points out, our proposals strengthen the Union, strengthen the accountability of Ministers for what they do in Scotland, and take Parliament to the Scottish people. They are a step forward.
Although I appreciate that our proposals do not do the damage that they want to do to Scotland's interests, I should have thought that Opposition Members would at least welcome them as a step forward. It shows how lacking in confidence they are that they do not welcome the opportunity to call the Government to account in Scotland.

Mr. John Maxton: Madam Speaker, have you noticed how touchy and tetchy the Secretary of State has been in presenting his statement today? Is it not clear—it is certainly clear to all of us on the Opposition Benches and I am sure it is clear to the people of Scotland—that the Secretary of State decided


that somehow he had to upstage the celebrations tomorrow of the launch of the constitutional arrangements recommended by the Scottish Constitutional Convention, but then realised that he had nothing to say?
All that the right hon. Gentleman could come up with was a ragbag of nothing. Was he not equally aware that the people of Scotland wanted a Government nearer to them and more accountable to them, but, above all, on matters relating to Scotland and within the framework of the Union, a Government elected by them? Until we deliver that, the Scottish people will not be satisfied.

Mr. Forsyth: A Scottish Parliament with a Government elected by the Scottish people is what the hon. Member for Banff and Buchan (Mr. Salmond) wants. If the hon. Member for Glasgow, Cathcart (Mr. Maxton) agrees with that, he should join the Scottish National party. If he is a Unionist, he believes in the Union and the sovereignty of this Parliament. The fact is that he is so damn scared of the nationalists that he is prepared to say almost anything and put at risk our ability to get a good deal for Scotland and ensure that it has a strong voice which is heard in Government. That is what our proposals will achieve.

Mr. David Harris: Government spending in Scotland is 21 per cent. higher than in England. There is massive over-representation of Scotland in this House. Does my right hon. Friend accept that most people in England, particularly in the south-west of England, believe, with justification, that Scotland gets an incredibly good deal from the Government and from the Union? Given those facts, can he understand the pathetic response of Opposition Members to his statement, which clearly strengthens the position of Scotland in the House and in the Union?

Mr. Forsyth: I do not want to alarm my hon. Friend, but the hon. Member for Hamilton has gone round Scotland telling people that the tartan tax might be used to cut taxation. The proposition that he has put to the people of Scotland—we do not hear Labour Members saying it here—is that my hon. Friend will continue to vote 21 per cent. more per head than he votes for his own constituency to a Scottish Parliament and will sit back and watch the Scottish Parliament hand out tax rebates.
If that was not so serious, it would be laughable. The hon. Member for Hamilton is trying to have his cake and eat it. I am afraid that the people of Scotland will lose out if Labour's proposals are ever shown the light of day. It is simply not sustainable to have a Scottish Parliament sitting in Edinburgh the budget of which is determined down here and which is able, even if it raises taxes of 3p in the pound, to raise only 3 per cent. of its revenue. That would be an unstable Parliament, and one doomed to disaster. The most vulnerable people in Scotland would suffer as a result.

Mr. Sam Galbraith: Does not the Secretary of State realise that, while much of what he said about the Children (Scotland) Bill was true, the crux came in Committee when there were controversial issues? The Committee always split along party lines, and the Scottish vote always lost. Does he not realise, therefore, that the real test of his proposal will be whether the Scottish vote in Committee counts, and that the only way to make it count is to hold the Committee stage of consideration of Bills in the Grand Committee? If that is

not a part of the Secretary of State's proposal, the sittings of the Scottish Grand Committee will be no more than just another travelling talking shop.

Mr. Forsyth: That is a point of view, but it is not a point of view with which I agree. If the hon. Gentleman's position is that the Scottish vote should prevail in determining what happens in Scotland, what would he say to those of my hon. Friends who would say that, in that case, the English vote should prevail in England? [HON. MEMBERS: "Hear, hear."] We have the federalists and the separatists shouting out. That is certainly not a Unionist position. The hon. Member for Strathkelvin and Bearsden (Mr. Galbraith) is an intelligent and thinking Member of Parliament. He should think about how far he is running away from the Unionism upon which the future of our country depends.

Mr. Neil Hamilton: On the basis of the infantile response of Opposition Members this afternoon, if that behaviour is typical, is my right hon. Friend aware that many English Members of Parliament will welcome the opportunity for the Scottish Grand Committee to sit in Scotland as often as possible?
For those of us who represent constituencies which strongly support the Union with Scotland, I should like to reiterate the point that was made by my hon. Friend the Member for St. Ives (Mr. Harris). We are prepared to continue to put up with the over-representation of Scotland in this House, and with the favourable financial treatment that Scotland receives from the British taxpayer, on the basis of proposals which strengthen the Union, but we would not be willing to put up with that if constitutional proposals such as those proposed by the hon. Member for Hamilton (Mr. Robertson), which weakened the Union and moved it towards separation, were brought before the House.

Mr. Forsyth: I am not sure that I agree with my hon. Friend's use of the phrase "put up". This is a Union. We are a United Kingdom, and we are a Conservative Unionist party. Scotland gets a good deal out of the Union, and England gets a good deal out of the Union. The Union is greater than the sum of its parts, and it works.
Opposition Members are prepared—for their own narrow party political ends, because they want to have an entrenched socialist majority in Scotland—to gerrymander our constitution, to put Scotland's vital services at risk, and to play straight into the hands of the nationalists. When the electorate discover that, the Opposition will find that their lead in the polls will tumble.

Mr. Dennis Canavan: If the Secretary of State really believes in people power, does he recognise the sovereign right of the people of Scotland to decide what system of government is best for them, instead of being constantly told what is best for them by a puppet of a discredited Tory regime?

Mr. Forsyth: Apart from the last part of the hon. Gentleman's question, I agree with what he says. If Scotland wanted to become independent, it could become independent. What is not possible is to vote for the ragbag of ill-thought-out proposals that is the Scottish Constitutional Convention, which would result in independence, because divisions would be created between Scotland and England and because damage


would be done to Scotland's interests. Even on the back page of a supplement that the Evening Times produced on a Scottish Parliament—16 pages of it—we are told, on the sports page:
Major Scottish disappointments on the international sporting stage could be a thing of the past under a devolved Parliament".
It seems that there is no end to the benefits. If that is true, it may well be that the Scottish people will be tempted.

Mr. Peter Luff: Before anyone comes forward with more radical constitutional proposals—a sensible package has been announced today—does my right hon. Friend agree that they would do well to reflect on the fact that public expenditure in Scotland is some 20 per cent. higher than it is in England? Does he understand that, as an English Member of Parliament, I am very happy to justify that to my constituents as an investment in the Union, but that I could no longer do so in any conscience if there was a Scottish Parliament with Scottish tax-raising powers of its own?

Mr. Forsyth: I am grateful to my hon. Friend. People must realise that the future of the Union is a matter for everyone in the Union. It is not just a matter for Scotland. What is so devastatingly damaging about the proposals of the hon. Member for Hamilton is that they take no account whatsoever of the interests of those from south of the Border. The hon. Gentleman is proposing that Scottish Members of Parliament will come down here with no say in health, education, agriculture or any of the other matters which concern our constituents for the simple purpose of keeping in office a Labour Government by voting on those matters which are in England.
That is an intolerable position, on which the hon. Member for Linlithgow (Mr. Dalyell), when he was the Member for West Lothian, asked his question. After six years of deliberation, the Scottish Constitutional Convention and the hon. Member for Hamilton still cannot answer the West Lothian question. Labour Members want to have their cake and eat it—they cannot have it.

Mr. Alex Salmond: May I return the Secretary of State to his statement? I suppose that any concession—however weak and belated—must be welcomed. But I must say to the Secretary of State that, if this is it after all the build-up, it is not opposition that he is risking today, but ridicule.
Will the right hon. Gentleman confirm that, under his proposals, the absolute Westminster veto over Scottish business remains? If what the Secretary of State is proposing had been in operation during the poll tax debate, would the proposals have gone to the Scottish Grand Committee? If the Scottish Grand Committee had come up with an inconvenient vote on the poll tax, would it have been overruled in this Chamber? Would the Secretary of State have defended his pet project through these processes?
The Secretary of State has sidestepped the question of nursery vouchers so far, but he told us in his statement that Scottish Members could decide on the future of deer. Can he explain to the people of Scotland in a simple

phrase why Scottish Members should be trusted with the future of red deer but not with the future of Scottish children?

Mr. Forsyth: I said no such thing. Legislation is a matter for this House and this Parliament. The proposals which I put forward allow for scrutiny and debate on matters affecting Scotland in Scotland and involving Ministers. [Interruption.] The hon. Member for Banff and Buchan (Mr. Salmond) has a perfectly honest and responsible position—he wishes Scotland to leave the United Kingdom and become independent. In those circumstances, he would find that he was £8.6 billion short of the money he needed to run Scotland, and the Scottish people would be greatly damaged as a result.
But in those circumstances, a Scottish Parliament would be able to decide on legislation in Scotland. That it is the nationalist position. It is not my position. The position of Unionists is that this is the sovereign House. The hon. Member for Hamilton has got himself into a dreadful tangle, because he has been so worried about the way in which the Scottish National party has been rising in the polls.

Mrs. Margaret Ewing: What about the poll tax?

Mr. Forsyth: The hon. Lady is getting excited about the poll tax. Does the hon. Member for Banff and Buchan remember that the great objection of Labour Members to the poll tax was that we were introducing a tax in Scotland a year ahead of England? But Labour plans to have a tartan tax for Scotland, which, year after year, the Scots will have to pay and the English will not. For sheer brass neck, that takes the biscuit.

Mr. John Home Robertson: After the poll tax and everything else that has been imposed on Scotland in the past 16 years, surely the Secretary of State cannot expect to smother the Scottish constitutional issue in a welter of amendments to Standing Orders in Committees. Does he accept that a Committee is, by definition, a subordinate body? Does he also accept that, under his proposals, it would be open to him and his successors to continue to impose legislation and decisions on the Scottish budget as has always been the case? If he is really serious about addressing the Scottish constitutional issue, why does he not take his seat in the Scottish Constitutional Convention tomorrow, as a representative of a small and dwindling, but nevertheless significant, Scottish minority?

Mr. Forsyth: The hon. Gentleman asks me to take a seat in the Scottish Constitutional Convention. I am told that tomorrow the members of the convention will say that they have reached an agreement.
The hon. Member for Hamilton says that we might have the office of Secretary of State, and that we would keep 72 Scottish Members of Parliament. The hon. Member for Orkney and Shetland (Mr. Wallace), who speaks for the Liberal Democrats on the matter, says that we would have to reduce the number of Members of Parliament, and that the office of Secretary of State would disappear. If they cannot even agree on fundamentals such as those, the convention sounds like no place to he. It has wasted six and a half years, and has still not come up with an answer to the question which the hon. Member for Linlithgow asked.
The hon. Member for East Lothian (Mr. Home Robertson) may not like being a part of the United Kingdom, and he may not like having this House as a sovereign body. If he feels like that, he should join the Scottish National party, and stop pretending to be a Unionist.

Mr. Calum Macdonald: Does the Secretary of State recognise that nobody objects to him and his colleagues having ideas or plans about education vouchers, local government or the poll tax? What is objected to—following our experience in the past 16 years—is that the right hon. Gentleman is able to impose these policies upon the people of Scotland against the wishes of the majority of the people of Scotland and against the wishes of the majority of Scottish Members of Parliament. Does he not acknowledge that that raises a democratic question about the way in which the House works, which his proposals do nothing whatsoever to address?

Mr. Forsyth: The hon. Gentleman is an honest man, and he is acknowledging the root of Labour's proposals. The Labour party does not like the fact that it is unable to govern in Scotland, where it gets the majority of the vote. But I ask the hon. Gentleman to contemplate what he is saying. If it is the Labour party's policy that we should have a Government who represent the majority in the constituent parts of the United Kingdom, how will his right hon. Friend the Member for Sedgefield be able to govern England as leader of a Labour Government—something that I think is unlikely—who do not have a majority of seats in England? That way lies the break-up of the United Kingdom, and the hon. Gentleman should have nothing to do with it.

Mr. Denis MacShane: As a Member representing an English constituency in Yorkshire, may I invite the Secretary of State to get off at Doncaster when he brings the Prime Minister by the nose to Scotland, to defend the Government's policies to the people of Yorkshire? I am not sure if the Secretary of State realises quite the constitutional innovation he is proposing. He proposes to turn Parliament—or rather, those on the Government Front Bench—into a kind of travelling circus which moves to other parts of the UK to discuss parliamentary and political problems.
We heard this morning an excellent address from the President of the United States, who represents the union of America. America has 52 state legislatures or parliaments with tax-raising powers. If it is good enough for the United States and most other modern democracies, why cannot the people of Scotland have their own legislature?

Mr. Forsyth: Scotland is a country, not a county. That is the difference between Scotland and Yorkshire. I am glad that the hon. Gentleman brought that matter up, because, for a while, the hon. Member for Hamilton—in an attempt to answer the West Lothian question—was telling us that Labour would introduce parliaments in Yorkshire and other counties. But that idea was swiftly abandoned in favour of quangos in the counties of England, and the answer to the West Lothian question was lost. We look forward to hearing tomorrow from the hon. Member for Hamilton what the answer to the West Lothian question now is.

Mr. Charles Kennedy: Let us return to the acid test. If the Secretary of State's revised

proposals had been in place at the time, would they have enabled Scottish Members to prevent the imposition of the poll tax—yes or no?

Mr. Forsyth: No, as the hon. Gentleman knows. He is fair-minded, and I would ask him to reflect upon the point I made. If we had a Labour Government with a majority in the Scottish Grand Committee, they would be able to do everything that they could do in a Scottish Parliament and more. They could call senior Ministers to account, and could have a Budget for Scotland.
The proposals which the hon. Gentleman supports for a Scottish Parliament would give the Scottish Parliament no say in the most important thing that a Parliament does. This House was established to be able to control and raise revenue. Revenue would still be determined in Westminster under the proposals from the constitutional convention. Scotland's voice in Westminster would be diminished, and therefore our ability to defend Scotland's interests and to hold Ministers to account would be undermined.

Mrs. Maria Fyfe: For the sake of absolute clarity, will the Secretary of State describe exactly how he intends to implement the voucher scheme? In what way is that more democratic than allowing a Scottish Parliament with elected members sent by the people of Scotland to decide how nursery provision should be paid for?

Mr. Forsyth: The hon. Lady has not got the message. Our idea of devolution is taking power from the Government and devolving it downwards to local government and to individuals. Nursery vouchers are about empowering people, while the Labour party wants politicians to decide what is good for people. Nursery vouchers are about giving people the money to allow them to choose for themselves, rather than having them do what they are told by their local authority. That is the sort of devolution that matters—devolution to people, not to politicians.

Mr. George Foulkes: Is the Secretary of State aware that there is a part of the United Kingdom in which Unionism is manifestly even stronger than it is in Eastwood, and that is Northern Ireland? Will he forget about his fixation with our proposal for a moment and explain exactly why the Government are proposing an assembly for Northern Ireland, which will have control over legislation and administration, with no reduction in the number of Members representing Northern Ireland here, or no reduction in their powers, while all he is suggesting for Scotland is a beefed-up Grand Committee?

Mr. Forsyth: The hon. Gentleman is making a comparison with Stormont, but he will know that such a proposal would mean reducing the number of Members of Parliament representing Scotland from 72 to 40—

Mr. Foulkes: The right hon. Gentleman has it wrong.

Madam Speaker: Order. The hon. Gentleman has had his say. He is very articulate. He must let the Minister answer.

Mr. Forsyth: I am not sure that the Leader of the Opposition would find the argument of the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes)


helpful. The hon. Gentleman has been going around Scotland saying that he is in favour of changing the clocks. It would appear that it is not merely on that matter that he is in favour of keeping Scotland in the dark.

Mr. Tam Dalyell: On a point of order, Madam Speaker.

Madam Speaker: I must call the hon. Member for Motherwell, North (Dr. Reid)—the only hon. Member who has been rising to ask a question, but who has not yet asked one.

Dr. John Reid: Does the Secretary of State really understand the length and depth of commitment behind the case for the devolution of power? It is not just a matter of the past 17 years: it was included in Keir Hardie's first manifesto, as well as the first manifesto of the Labour party in Scotland and, incidentally—[Interruption.]—this will be of interest to Unionists—at precisely the time that Gladstone was suggesting that he might give the Irish devolved powers. Had that happened, they might still be in the Union.
In that context, the right hon. Gentleman failed to deal with two problems. He dealt with scrutiny and accountability, and I welcome any step forward on those—I also welcome what he said today—but he failed to deal with the real question of power and of whether the

Government are prepared to devolve the power of decision making on purely Scottish affairs to Scotland within the general sovereignty of Westminster. Is he prepared to countenance any devolution of power, rather than accountability? If he is not, and has not today, he might as well not bother putting forward any more proposals.

Mr. Forsyth: I am not a federalist and I am not a Unionist—[HON. MEMBERS: "Hear, hear."] I am a Unionist. [Interruption.] I think that the House knew what I meant to say. I am not a federalist, and I am not a nationalist. I am a Unionist, so I am not in a position to help the hon. Gentleman.
I ask the hon. Gentleman to reflect on one thing on behalf of his constituents, and it is a serious matter. The other day, more than 3,000 jobs came to his constituency, which desperately needed them after the closure of Ravenscraig. They came as a result of a major inward investment project. Scotland was competing with the Welsh, and Wales was a possible site because of the proximity of various glass-making factories.
Does the hon. Gentleman think that, if the Welsh Office had been able to say, "If you come to Wales, you won't have to pay the tartan tax that you'll pay in Scotland," the investment would have gone to Scotland? The Labour party's proposals to hobble Scotland with a tartan tax would destroy jobs and the inward investment on which his constituency depends.

Points of Order

Mr. Tam Dalyell: On a point of order, Madam Speaker. I want to raise a point of principle about ministerial statements. It may be within your recollection that, an hour ago, the Secretary of State for Social Security was asked a specific question about tax and long-term care benefits. In reply, he said he could not give the figure for which he was asked, because that was a matter for the Chancellor of the Exchequer.
My point of order is this, and it results directly from the Secretary of State's statement. In the eighth part of that statement, he said that benefits from long-term care insurance would be tax free. Should not Ministers who make undertakings in their opening remarks be responsible for the explanation and putting on the financial tag, rather than leaving it to another Minister and saying that they will write about it at some time in the future? That is a matter of principle.

Madam Speaker: It is not for me to comment on ministerial statements—[Interruption.] I am being prompted by Ministers to give the figure. It is not for me, as Speaker, to give the figures. Ministers are responsible for the comments they make at the Dispatch Box. I am sure that the hon. Gentleman may well pursue the matter with the Minister and get the correct reply recorded in Hansard.

Mr. Nick Hawkins: On a point of order, Madam Speaker. You will be aware of the serious events that took place in the Committee Corridor late yesterday afternoon. The hon. Member for Nottingham, South (Mr. Simpson), who is a cricketing friend of mine and has apologised to me, was one of the sponsors of a meeting in Committee Room 14. At the conclusion of that meeting, when those attending were not accompanied by any hon. Member, they refused to leave, thus preventing another meeting taking place, which I and some of my hon. Friends were planning to attend.
The Serjeant at Arms had to be informed, and a large number of police officers summoned. Hon. Members on both sides of the House were prevented from passing and re-passing the Committee Room on their way to and from other meetings in that Corridor. Worst of all, those attending the meeting, who were socialist militants, insisted on continuing, and not only to obstruct the business of this House, but to chant socialist slogans in a most offensive way. That exploded for ever the myth of new Labour.
I know that the hon. Member for Nottingham, South has written to you to apologise, and to indicate his stance on the matter. What steps will you take to ensure that hon. Members are aware that they never allow those they have invited into this place to remain in Committee Rooms unaccompanied by any hon. Member?

Mr. Alan Simpson: Further to that point of order, Madam Speaker. I am grateful to the hon. Member for Blackpool, South (Mr. Hawkins) for raising this matter, and giving me the opportunity to repeat the apology that I made to you in writing last night, to hon. Members who booked the subsequent meetings, which were disrupted, and to the many hon. Members with whom I spoke in the corridors during what seemed to he a large part of yesterday evening.
I owe the House an apology and an explanation. The meeting was booked—

Madam Speaker: Order. No explanation is necessary. It is perfectly legitimate for hon. Members to book rooms in this House for a meeting. What disturbs the House and me is that the hon. Member responsible for those lobbyists did not see them off the premises. That is the point, and I think that the hon. Gentleman is giving some explanation and making an apology.

Mr. Simpson: Although I had made assiduous efforts to ensure that everyone came in properly, my error in failing to make the exit equally uneventful was seriously misjudged. I was the last to speak at the meeting, and left it only to inform the police and staff on the Corridor that I had been told that those attending were about to depart. My mistake was that I went down to the Lobby to pick up a full copy of the Budget briefing papers.
Only when I was then informed by the Serjeant at Arms that the meeting had not disbanded did I realise that I had not discharged my responsibilities fully and properly, and for that I apologise to the House in the way that I apologised to you last night.

Madam Speaker: That matter was brought to my attention at the time. The hon. Member for Nottingham, South (Mr. Simpson) and I have exchanged correspondence. He is left in no doubt as to what I feel about that neglect of duty yesterday. The matter is now closed.

Mr. Peter Luff: rose—

Madam Speaker: Sit down. The hon. Member for Nottingham, South has apologised to the House and to me. I am sure that there are lessons to be drawn from that incident, and that it will not happen again.

Mr. Mike O'Brien: May I draw to your attention an incident in my constituency, on which I wish to raise a point of order, Madam Speaker? Coleshill high school in my constituency received an Office of Standards in Education report from the schools inspector. An attempt was made to withdraw the report a couple of days later, apparently because of some of the contents.
A second report was filed which had had some of the contents of the first report deleted. What was deleted was criticism of the Government.

Madam Speaker: Order. What is my responsibility in the matter?

Mr. O'Brien: I am just coming to exactly that point. The situation raises serious questions about the way in which such reports are prepared and about the whole process. Is it not exactly the sort of—

Madam Speaker: Order. The hon. Gentleman must come to my responsibility in the matter of this report.

Mr. O'Brien: Is it not exactly the sort of incident on which you should insist that the Secretary of State for Education and Employment should make an urgent statement, because it raises such profound issues?

Madam Speaker: I have no authority or influence over Ministers making statements. The hon. Gentleman has not raised a point of order; he has wasted the House's time. If a statement is to be made by a Minister, it is always on


the annunciator—as today's three statements were—by 1 o'clock on the day that it is being made. Can we proceed with our business, or are there other bogus points of order?

Mr. Luff: On a point of order, Madam Speaker. This is not a bogus point of order. I am sure that the whole House will appreciate the apology offered by the hon. Member for Nottingham, South (Mr. Simpson)—

Hon. Members: Bogus!

Madam Speaker: Order. Allow me to deal with this. The hon. Gentleman will resume his seat for a moment.

Mr. Luff: rose—

Madam Speaker: He will resume his seat. If he has a different point of order, I will of course hear it, but the other matter is now closed.

Mr. Luff: My understanding is that the right hon. Member for Chesterfield (Mr. Benn) had also booked that Room, and I hope that you will draw his attention to what you have said about the other matter, and clarify to all hon. Members the fact that, when they make bookings, as the right hon. Member for Chesterfield also did, they have a responsibility—

Madam Speaker: Order.

BILL PRESENTED

ASYLUM AND IMMIGRATION

Mr. Secretary Howard, supported by The Prime Minister, the Chancellor of the Exchequer, Mr. Secretary Lilley, Mrs. Secretary Shephard, Mr. Secretary Hague and Miss Ann Widdecombe, presented a Bill to amend and supplement the Immigration Act 1971 and the Asylum and Immigration Appeals Act 1993; to make further provision with respect to immigrants and the employment of immigrants; and for connected purposes: And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 8.]

Orders of the Day — WAYS AND MEANS

Order read for resuming debate on Question [28 November].

Orders of the Day — AMENDMENT OF THE LAW

Motion made, and Question proposed,

That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance; but this Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—

(a) for zero-rating or exempting any supply, acquisition or importation otherwise than by—

(i) zero-rating or exempting supplies of goods which are, or are to be, subjected to a fiscal or other warehousing regime; or
(ii) zero-rating or exempting supplies of services on or in relation to such goods;
(b) for refunding any amount of tax otherwise than to persons constructing or converting buildings in cases where the construction or conversion is not in the course of furtherance of a business;
(c) for varying any rate at which that tax is at any time chargeable; or
(d) for relief other than relief applying to goods of whatever description or services of whatever description.—[Mr. Kenneth Clarke.]

Question again proposed.

Orders of the Day — Budget Resolutions and Economic Situation

Madam Speaker: I must put a 10-minute limit on Back-Bench speeches.

Mr. Gordon Brown: The House may recall that in Easter this year the Chancellor of the Exchequer said that the feel-good factor would probably not return for two years—until after the election. We now know what he meant, because the central challenge for the Budget—to acknowledge and tackle the real weaknesses of the British economy—was to encourage new and sustained investment, to close the investment gap with our competitors and to move people out of welfare into work and so reduce the huge bills for social security.
In yesterday's Budget, however, not only was there no significant encouragement for new investment, and no new plan to tackle unemployment, but the Chancellor had to report that, after 16 years of Conservative government—and after all the boasts of economic transformation—investment, three years into a recovery, is virtually stagnant, rising by only 1 per cent. this year. Public borrowing is now £7 billion above his estimates of the summer. It will be £10 billion higher next year and £10 billion higher the year after. Public finances are in such a poor state that even after a shocking 17 per cent. cut in public investment over the next three years and a 27 per cent. cut in the hospital building programme, he has had to admit that his best chance of balancing the Budget is probably not in this century but at the beginning of the next.
The Chancellor cannot, because he is imprisoned by his own economic failure, deliver the one measure that Conservative Members were demanding, and looking to for their job security: undoing the damage of the 7p tax rises since 1992.

Mr. Jacques Arnold: In view of his concerns over public finance, how would the hon. Gentleman finance the £8 billion cost of his 10 per cent. starting rate for income tax?

Mr. Brown: There is no £8 billion cost of a 10p starting rate for income tax. I will tell the hon. Gentleman what the choices will be at the next general election. HON. MEMBERS: "Answer the question."] I am answering the question. The hon. Member for Gravesham (Mr. Arnold) has a few questions to answer to his constituents about the promises that he made about tax cuts that have never been delivered.
I will tell the hon. Gentleman what the choice at the next election will be: it will be between what the Chancellor said yesterday—the Conservative plan to abolish capital gains tax and inheritance tax, at a cost of more than £4 billion to benefit only a few—and our proposals to use the same resources to get the starting rate of income tax down to 15 per cent., or preferably 10 per cent. I know what choice, on fairness grounds and on employment grounds, the electorate will make.
This is not just the 7p up and 1p down Budget. It is not just the Budget that gives—as I will show in a minute—with one hand but takes with another. The Government cannot present the Budget as inspiring, as a turning point

or as the 17th relaunch—for it would have been the 17th failed relaunch—so they now to try to salvage it and present it as cautious, sensible and prudent.
Prudence would have meant that the Chancellor tackled our deep-seated economic weaknesses, that he had a long-term strategy while being cautious in the here and now, but there is no sign at all from his Budget that he has any sense of direction or strategy for the British economy. He cannot be considered prudent if he neither acknowledges nor addresses the fundamental investment and skills gap with our competitors and has no clear direction for this country. He is not a prudent Chancellor with real scope and options that he can consider and reject, for what he calls his prudence is forced on him. He is a man without real choices, a prisoner of his Government's failure, paralysed into inaction as a result of everything that has happened to the economy under Conservative management for the past 16 years.

Mr. Nick Hawkins: The hon. Gentleman has talked about the need for investment. How will his party's policies to sign up to the social chapter and have a statutory minimum wage help investment? They will ruin investment, especially in manufacturing, and destroy jobs.

Mr. Brown: It is interesting that the same question that was asked of me last week has been asked this week by a different hon. Member who was not here last week. I will repeat what I said. Britain has slipped from 13th to 18th in the world prosperity league. Of the 17 countries ahead of us, 16 have a minimum wage. The hon. Gentleman must face up to the fact that there is a minimum level of social justice that contributes to economic efficiency in modern economies. The idea that we should return to a 19th century situation, where there is no protection at all for people in the workplace, is unacceptable to this country.
The result of everything that has happened is that after 21 tax rises—the biggest tax rises in history—with, even this year, as was admitted in a recent report, living standards for the majority still falling, with consumer confidence still weak because of widespread job insecurity and despite all the promises of the Conservatives being the low-tax party, all the Chancellor can offer to undo the damage of a 7p in the pound tax rise from 1992 is to make it a 6p tax rise from 1996.
People will ask, "What has all the suffering been for?" It has been for one solitary tax cut that cannot mitigate a record of 21 tax rises. Big tax rises followed by a small tax cut still equal a big tax rise since 1992. A tax cut one year in five cannot undo the damage of tax rises in the other years. Three billion pounds given away cannot compensate for more than £16 billion that has been taken away.

Mr. Tim Smith: The hon. Gentleman says that the 1 per cent. reduction in the standard rate is the only progress that is being made on tax reductions, but that it is not true. There are two other respects in which we shall be moving towards a 20p rate. The tax on savings is to be reduced to 20p, at a cost of £800 million. Will he support that?

Mr. Brown: The hon. Gentleman raises what the Deputy Prime Minister said immediately after the Budget. The Deputy Prime Minister was sent into the television


studios to tell people that they were £9 a week better off as a result of the Budget, but when the Treasury press release was examined immediately afterwards, it turned out that £6.50 of the £9 was an assumption that people were getting a 4 per cent. pay rise and that the tax changes added up to a fraction of the £9 that was mentioned. Taken overall, all the tax changes made by the Chancellor are worth little more than £2 a week to the ordinary family. Many people's savings have been destroyed by the Government; the hon. Gentleman should face up to that fact.

Mr. Jacques Arnold: Will the hon. Gentleman give way?

Mr. Anthony Coombs: rose—

Mr. Brown: No, I will not give way to the hon. Member for Gravesham again. I will give way to the hon. Member for Wyre Forest (Mr. Coombs), and then I shall continue my speech.

Mr. Coombs: The hon. Gentleman talked about savings, but what destroys savings are the inflation rates—about 26 per cent.—that we had under the last Labour Government. Will he tell the House what his target inflation rate would be?

Mr. Brown: I thought that the hon. Gentleman would ask about the 40 per cent. increase in unemployment in his constituency in the past five years. I will tell him about inflation. We have said very clearly that we will set an inflation target. We shall consult the Governor of the Bank of England and set that rate in government.
The Chancellor must now explain his inflation target. Is it 2.5 per cent.? If it is, he has gone beyond it and he has failed to meet it this year. There is no guarantee that he will meet it in future years. I thought that the Chancellor might tell us that his inflation target is 1 to 4 per cent., but now he is telling us that it is 2.5 per cent. That is very similar to the memo that he sent to Back Benchers, in which he said that he might meet the 1 to 4 per cent. target on some, but not all, occasions.

The Chancellor of the Exchequer (Mr. Kenneth Clarke): I did not intend to intervene, but I shall answer the question. The target is 2.5 per cent. by the end of the Parliament and we are on course to achieve it. As I said yesterday, the target will be 2.5 per cent. for the rest of the Parliament. The Chancellor, and not the Governor of the Bank of England, is supposed to set that target. Why cannot the hon. Gentleman answer any of the perfectly legitimate questions that my hon. Friends have put to him? What will he do in the vote on the tax on savings, what inflation target will he set and what is the cost of his proposal for a 10p basic rate?

Mr. Brown: I have answered all those questions. I thought that, after last night, hon. Members would be more anxious to question the Chancellor about what he has done and what he has failed to do.
I have made it absolutely clear that we shall consult the Governor of the Bank of England on the inflation target when in government. That is the sensible thing to do. The Chancellor must explain why inflation this year is at 3 per cent. when his inflation target is 2.5 per cent. The

Governor of the Bank of England says that he has no confidence that the Chancellor will meet the target by the end of the Parliament.
I will remind hon. Members about taxation. Despite all the promises of tax cuts, year on year, the tax cuts in the Budget leave value added tax at 17.5 per cent. and VAT on fuel at 8 per cent. Employees' national insurance contributions have risen since the last election and they have not been reduced. Mortgage assistance has been halved and it remains unchanged. The airport tax and home contents insurance tax have not been reduced. Anything that the Chancellor has given this year must be set against what he has taken away. After VAT rises, national insurance rises, cuts in mortgage help, cuts in the married man's allowance and new airport and car taxes, people are almost £700 worse off under the Conservative Government. Having taken the pounds, they are returning only the pennies. People have suffered enough as a result of the Government's actions.

Mr. John MacGregor: rose—

Mr. Brown: I will give way to the right hon. Gentleman. He is a distinguished former Treasury Minister and I doubt whether he agrees with many of the things that have happened since he left the Treasury.

Mr. MacGregor: I shall make my speech in my own way, thank you very much. We know that the hon. Gentleman has already committed himself to substantial public expenditure increases. Would he reverse the tax measures that he has just mentioned? Would they become tax reductions if he were in power?

Mr. Brown: I have committed the Labour party to one measure: the employment and training programme. We would fund that measure—just as the Chancellor should have—with a windfall tax charge on the profits of the privatised utilities. When the Chancellor speaks at the end of the debate, he will have to explain why the Conservative party is always a soft touch for the privatised utilities.
Let us be clear that what the Chancellor gave yesterday he also took away. The tax cut will be paid for by a council tax rise of 11 per cent.—if our calculations are correct—in some parts of the country. Water charges and rents have increased and there are hidden taxes. Rail fares are up, as are prescription and dental charges. The Chancellor and the Deputy Prime Minister have claimed that we are £9 a week better off. Some people will be better off by £9 a week, but the Chancellor will have to scour the country looking for a whisky-drinking, vintage-car-owning pensioner who is looking for community care and who has assets of between £8,000 and £16,000. Very few people are better off in real terms as a result of the Budget.
On the fairness of the Chancellor's proposals, it has been reported today that—after all the benefits that they have received—the richest 10 per cent. will gain £7.30 per week and the poorest 40 per cent. will gain only £1.04 per week after the Budget changes.

Mr. Malcolm Bruce: rose—

Mr. Brown: I shall give way to the hon. Member for Gordon (Mr. Bruce) because he is a Liberal Democrat.

Mr. Bruce: I am grateful to the hon. Gentleman for giving way. He says that he is concerned about the rise in


council tax, which has occurred because of the Chancellor's sleight of hand in putting pressure on local authorities to finance the education budget. Does the hon. Gentleman agree that the education money would be better provided from the 1p income tax cut? Will he join the Liberal Democrats in voting against that 1p reduction, which we believe should go to education?

Mr. Brown: When the hon. Gentleman makes his contribution to the debate this afternoon, I should be grateful if he would confirm whether he agrees that the assisted places scheme should be scrapped and the money used to reduce class sizes. That is an important change. I should also be grateful if he would tell us whether the Liberal party will go to the next election promising a rise in the basic rate of income tax, as he hinted in his speech yesterday.

Mr. Bruce: We will tell the hon. Gentleman at the general election. I asked him a simple question. He and his colleagues have said that they want to put money into education and that they do not wish to increase council taxes. We have pledged to vote against the 1p reduction in income tax this year—has he?

Mr. Brown: Never has an intervention been more telling. The Liberal party spokesman is not prepared to say whether he will go to the next election promising a tax rise. That would be the honest position of a party that has pledged to vote on Monday against the tax changes.
Let us examine what the changes mean for ordinary people throughout the country. Hon. Members will recall that the Chancellor told us that the tax rises since 1992 should not be exaggerated. He said that, for most people, they amounted to little more than the price of three pints of beer a week. Staying with the pub economy—which the Chancellor finds so congenial and of which he is an acknowledged master—and using the same equivalents, we find that the weekly sums from the tax cuts that he announced yesterday will amount to fewer than two or three packets of peanuts. That is the equivalent of what the Chancellor has done.
Let us recall what the Chancellor told the Conservative party conference only a few weeks ago. Do hon. Members remember what he said to earn the traditional crouching ovation that he gets at such events? He said:
It is a Budget I'm looking forward to a lot more than the last two.
Many of you feel, I know, that the time has come for some reward in the Budget.
So far this Parliament we have given you the hors d'oeuvres and not the main course, the trailer not the film, the warm-up not the main performance".
I can tell the Chancellor that, as a result of yesterday's Budget statement, we have gone straight from the hors d'oeuvres to paying the bill without receiving the main course. We have gone from the trailer to the end credits. People are walking out and there is still no main feature. We have gone from the warm-up to the final curtain, and nothing that the Chancellor has done is worth a single round of applause.

Mr. Barry Legg: The hon. Gentleman said that nothing that the Chancellor did yesterday was worthy of support, but I remind him that his leader pledged his support for the 1p reduction in

income tax. Will the hon. Gentleman tell us whether he believes that that 1p reduction should be financed by less public spending or higher borrowing?

Mr. Brown: I will tell the hon. Gentleman what we shall do. We shall not vote against the 1p cut in income tax; and I will tell him why. People have suffered enough; they have been punished enough by the Conservative Government.
I find it interesting that Conservatives—not only Conservative Members of Parliament, but Conservatives in the country—now spend all their time writing to the Labour party. One of my colleagues received his Budget representations, not from his local Labour club, but from Middlesbrough Conservative Club Ltd., founded in 1883. The letter started:
The Management Committee of this club are becoming increasingly concerned about the falling trade which has been apparent for some months now. We know that we are not alone in the immediate vicinity. Trade is down by some 8 per cent. throughout the licensing trade in the region. My Committee will be obliged if you will bring this matter to the attention of anyone you think can influence the situation.
So little faith do they now have in Conservative Members that even Conservative clubs find it necessary to write to the Labour party with their Budget representations.
What of the fundamental problems that should have been tackled in the Budget, the original causes of the tax increases—the neglect of investment and the failure to get people back to work? After 16 years of promises of economic miracles, what has been done about the central challenges to arrest the decline from 13th to 18th place in the world prosperity league? Where is the investment-rich economy that the Government promised? There has been only a 1 per cent. increase in investment this year, in spite of a promise of a 6 per cent. increase in the summer.

Mr. Andrew Robathan: Will the hon. Gentleman give way?

Mr. Brown: I will not give way again. I have given way a dozen times to Conservative Members and none of them—[Interruption.] In spite of their barracking, none of them has acknowledged that they should be returning to their constituents to apologise for what has happened as a result of the Budget.
We have the slowest increase in investment out of recession since the 1930s, yet there was not one measure, apart from those previously announced, that the Chancellor could genuinely say directly gives attention to spurring investment forward.
If the Government had been serious, they would have introduced the investment allowances that we proposed in our pre-Budget submission. If they had been serious about infrastructure investment and helping the housing market, they would have considered the phased release of capital receipts to allow local authorities to build. Instead of improving the prospects for investment, however, they have cut public investment.

Mr. Robathan: rose—

Mr. Brown: I will not give way again.
What do the Government offer in its place? The private—

Mr. Legg: Will the hon. Gentleman try to answer one question?

Mr. Brown: I have given way many more times than most Ministers are prepared to, and Conservative Members are intent on not allowing me to make my remarks; they are simply trying to disrupt them.
What do the Government offer in place of the cuts in public investment? They offer the 10th relaunch of the private finance initiative, and not a plan or a programme but a wish list.
The Chancellor should listen to this. He failed, during three years of the private finance initiative, to deliver projects worth the original sum of £15 billion and delivered only £1 billion—a fraction of what was promised. Having failed to deliver his promise, the right hon. and learned Gentleman simply makes more promises and announces the possibility of 1,000 projects, at a cost of £25 billion. Is it not typical of the Government to seize on the manifest failure of their private finance programme, declare it a resounding success and move it right to the centre of their plans for the future without any sign of how they will repair the failures of the past three years?
The small print reveals that this is not a programme but an open-ended list of unlikelihood, offering not a plan but what the Budget press statement calls
an illustrative list of projects"—
merely a list of potential partnerships that have been identified. What started as an initiative, followed by the formation of a panel and then a panel executive, has now become simply the announcement of an action plan that will come later.
Where has that taken us? A car park in Eastbourne; the unpopular Skye bridge. The jewel in the crown appears to be a hospital incinerator built in Hillingdon, which is now the subject of complaints about toxic emissions and is being used by Blue Circle Industries plc more than by local hospitals. Beyond that, we are given castles in the air, when people want projects on the ground.
Private companies in the construction industry and elsewhere are now longing for the task force, the statement of priorities and the clear commitment to action that the Labour party offers.
If the Chancellor wants an example of what has happened to the private finance initiative, he need look no further than the channel tunnel rail link. It was launched as a project in 1986, legislation was promised in 1987 and finance promised from the Government in 1993. The bids have yet to be assessed and the builders have yet to be agreed. In September, the Government finally took a decision; they appointed a negotiator to consult and then discuss with prospective bidders. There is no signature and no start, almost 10 years on. Now, as the French travel on their high-speed link, completed before the tunnel was opened, the British link may not be completed until next century—the year 2002.

Mr. Hawkins: Will the hon. Gentleman give way?

Mr. Brown: I will not give way any more.
What of crossrail? It was first promised in January 1989, the Government gave the go-ahead in 1990 and this year, 1995, it is at risk because of the costs of rail privatisation.
Public money for the railways should be used not to fund expensive consultancies and the subsidies that will accompany privatisation but to invest in rail transport.
Why not use money from the venture capital trust and the European investment scheme budget, which has not been taken up, to invest and help small businesses move ahead? Why not bring new technology into schools under competition proposals that my right hon. Friend the Leader of the Opposition has made?
What is happening to employment under the Government? The best way to save money in the long run is to tackle the £20 billion bill that is the cost of unemployment. The biggest barrier to sorting out our public finances is the billions being poured down the black hole to pay the costs of unemployment.
Perhaps the Chief Secretary to the Treasury will draw the House's attention to what he said in his pamphlet, "Changing Gear: What the Government should do next" before he landed up at the Treasury. As we are discussing public investment, let me read what he said:
In the public sector, a wide range of public investment should be undertaken. Amongst the investment undertaken should be house-building, renovation, insulation aimed at inner-city areas in part at least, road building, other infrastructure work, telecommunications and school equipment.
The right hon. Gentleman said that it would be sensible to think that £4 billion to £5 billion would be spent on capital projects in the next two years. He continued:
If such a policy combined with other less expensive initiatives we suggest elsewhere on training and social policy were to be vigorously pursued, the atmosphere as well as the real economy might well be different at the time of the election, and if we lost, we would at least not have landed ourselves with the permanent stigma of apparent callousness and inaction"—
exactly the stigma that now threatens to attach itself to the Conservative party as a result of the huge cuts in capital investment for which the Chief Secretary and Chancellor are now responsible. I will tell them how they might begin to tackle the problem. They might do so by adopting our plans to reduce unemployment, especially youth unemployment and long-term unemployment.
What do the Government do instead? They scrap the community action programme, which was launched two years ago by the then Chancellor in the Budget and which was helping 100,000 people a year. They cut the training budget by 4 per cent.—I am not surprised that the Secretary of State for Education and Employment is now not to speak in this week's Budget debate—and, of course, by freezing it, they scrap the one-parent benefit, which provides an incentive for single parents to return to work. They are making it increasingly difficult for single mothers to take up employment again.
What should the Government have done? They should have introduced our employment programme, and they should have paid for it with the windfall tax on the utilities. If anyone has any doubt about the case for such a tax, they should look at the profit made by Yorkshire Water. It has increased its profit by 50 per cent.—not by supplying the people of Yorkshire with water, but by not supplying them. [Interruption.] Conservative Members are well aware that the plans to take away the supply of


many people in Yorkshire are still on the table, and could be introduced. But how can they defend circumstances in which the profits of Yorkshire Water have doubled, while the service that it is providing is the subject of massive criticism—even from constituents who normally support the Conservative party?
This Budget is a survival package for the Government, and it has failed. It does not begin to tackle the underlying weaknesses. It does not tackle the investment gap with our competitors; it does not tackle the skills gap, because there is no new measure to deal with post-school training for young people other than the measure to deal with single parents, as the one-parent benefit has been cut.
In my view and, I believe, in the country's view, the Government have run out of steam and given up on the future. They are not prudent; they are paralysed and powerless—frozen in the headlights of the oncoming election. This is the Budget of a Government who are now a prisoner of failure. The public are not short-sighted, greedy, gullible, easily fooled or forgetful of what has happened. The public do not want to praise this Government: they want to bury them.
This is a Budget that marks not the beginning of the Conservative party's fight back, but the irrevocable public exposure of its terminal decline. It will be seen not as the brave new launch, the turning point for victory, but as the last-gasp effort of a decaying regime.
After this Budget, the public know as they have never known before that the long night of Conservative rule is drawing to a close. It is the Budget of a Government with nowhere to go and a Chancellor with nothing left to offer. This Government are in terminal decline: they should go, and go soon.

The Chief Secretary to the Treasury (Mr. William Waldegrave): I always enjoy the speeches of the hon. Member for Dunfermline, East (Mr. Brown). That was not one of his vintage contributions, but I was very flattered when he referred to my elderly pamphlet, produced in 1980. I recommend its approach to my hon. Friends on the Back Benches; it was moderately troublesome to the Government of the day, and shortly afterwards I was given a job. I consider that quite a good way of proceeding.
I think that the pamphlet makes me look rather good. It sounded rather moderate to me. Given the investment figures in those programmes of the 1980s, the Government have a very good record. And, if we are to go back into the past, we cannot fail to remind the hon. Gentleman that he came to the House on a CND manifesto. Opposition Members always get cross when we remind them of that, but it strikes me as a more fundamental shift in political stance than any that I have made.
The Budget has three main themes. It keeps spending down, keeping borrowing on its downward path and protecting high-priority programmes; it sets Britain on a course of cutting taxes in a sustainable way; and—through the £700 gain in real income that the average family has experienced since the last election; some £450 will probably be added next year—it continues, in a plausible way, our campaign to reform the way in which government works, so that the state does less but new partnerships are built with the private sector.
First, let me deal with spending and borrowing. The Budget keeps borrowing on a clear downward path by keeping tight control on public spending. Lower borrowing will keep pressure off interest rates. That is good news for business, investment, home owners and, above all, jobs. I am sure that the House will be pleased to learn that three building societies have cut their mortgage rates this afternoon; that shows that they support the climate of confidence produced by my right hon. and learned Friend's Budget.
We have made tough decisions to return public finances to a sound footing. Borrowing always goes up in a recession, but once the recession is over the test of a Government is the Government's ability to ensure that it goes down again. That is what we are doing. We have done it before. We inherited an unsustainable level of public borrowing in 1979. There was a tough Budget in 1981. My noble Friend Lord Howe—ignoring 364 economists, the Labour party and everyone else—tackled the public sector borrowing requirement head on. The consequence was one of the longest periods of growth that we had experienced since the war.
We are now doing the same. We are already in the fourth year of a period of sustained growth—the steadiest for a generation. Exports are doing extremely well: last year we increased our share of world trade, which is very unusual. Businesses are investing: contrary to what was said by the hon. Gentleman, manufacturing investment was up 12 per cent. this year. As for business investment, an increase of 9 per cent. is forecast for next year. Living standards are improving, and unemployment is falling—and all that is happening without an increase in inflation.

Mr. Donald Anderson: What is the reason for the continued decline in sterling?

Mr. Waldegrave: The hon. Gentleman should ask the markets. We do not have targets for sterling. I do not know whether the hon. Gentleman would like to set some targets; would he like sterling to be higher, or lower?

Mr. Anderson: rose—

Mr. Waldegrave: The hon. Gentleman will find that there are benefits as well as costs. What matters is the inflation target, and the inflation target will be met. I do not think that serious commentators are in much doubt about that.
We intend to lower the public sector borrowing requirement further. Our goal is clear: we intend to bring the budget back towards balance over the medium term. We have done that before, and we will do it again. Balance should be achieved at the end of the decade; the current balance will be in surplus a year or so earlier.
Sound public finances cannot just mean ever higher taxes to balance ever higher spending. That is the fundamental difference between Conservative and Opposition Members. We believe that, when the businesses and workers of the country create wealth, it belongs to them. It is their right to keep what they make; Government must take only the minimum that is needed to provide decent services and the essential functions of government.
The Labour party used—honourably and openly—to believe the opposite: that far more should be done and financed collectively, and less left to the individual. As the right hon. Member for Chesterfield (Mr. Benn) put it


in an eloquent speech in the debate on the Gracious Speech, it should be done less by profit and more by collective will. That is, after all, what the political argument has been about for 200 years or so. Now, however, things are alleged to be different. As The Independent recently put it, elegantly,
The British Left have at last returned, snout-first, to the politics of the pork barrel".
That was the view of Niall Ferguson. New Labour claims to want even lower taxes than we do, but with no theory and philosophy to explain it. [Interruption.] If the hon. Member for Edinburgh, Central (Mr. Darling) can prove to me that Niall Ferguson was writing in The Daily Telegraph, I shall withdraw what I said at once.

Mr. Alistair Darling: The article to which the right hon. Gentleman refers was written by Niall Ferguson, but it was not the view of The Independent. Niall Ferguson is a commentator, and he is entitled to his view. The right hon. Gentleman should not suggest that the newspaper, editorially, took that view.

Mr. Waldegrave: That strikes me as the feeblest intervention of the afternoon. I thought that the hon. Gentleman was going to point out a serious mistake. Muddling up The Daily Telegraph and The Independent would have been a serious mistake. I do not think that Opposition Members like what Niall Ferguson wrote.
Labour has now joined in the competition for low taxes, but it has no ideology, no theory and no idea of what that is for. We had about £1 billion of extra spending from the hon. Member for Islington, South and Finsbury (Mr. Smith), who opposed all the savings that my right hon. Friend the Secretary of State for Social Security had made. I think that that is the way in which Labour is proceeding. Its practice is to oppose and sneer at all the savings, and to tell the lobby groups that it is against them, but then to back off and, when its members have lunch with people in the City, say that that was not spending.
For us, the Budget process starts with the tight control of public spending. We have always fought to keep state spending down. We have always believed that one can provide the services that people want without putting an intolerable strain on the taxpayer. We have always linked that to our fundamental political belief: that in the end big government is not only inefficient but threatens freedom. We do not—as the Opposition do—collect shopping lists of expensive commitments from the lobbyists and pressure groups and then ask the taxpayer to foot the bill. We start with the taxpayer.
In July, the Cabinet asked the special committee on public spending—EDX—to re-examine public spending. We did so. We found savings. They were not easy. There is very little Government spending that does not have some defender or nothing to be said in its favour, or the House would not have voted it in the first place. But we succeeded.

Mr. Harry Barnes: The Red Book tells us that public expenditure is to go down by £3.25 billion. Elsewhere, reserves have gone down by

£3.2 million. Are we not left with dangerously low reserves? What if the money that is supposed to be saved on social security fraud does not materialise?

Mr. Waldegrave: That is a perfectly fair point to probe, but I do not think that the hon. Gentleman is right. We have not broken the reserve in any recent years. This year the underspend looks like being about £750 million or £800 million. We thought carefully about a reasonable figure for the reserve, and I can assure the hon. Gentleman that we have one.
We succeeded in finding public spending savings. My two predecessors did not make my task easier; they had helped the Chancellor to cut projected public spending in his previous two Budgets by £43 billion. None the less, in this year's public spending round, we have gone further and the total has gone up to £53 billion.
For 1997–98 alone, we cut the public spending control total by £3.2 billion from the ceilings that the Cabinet endorsed at the start of the spending round. That is about 1 per cent. in real terms. It is also £12 billion lower than when we first set plans for that year, two Budgets ago. This year, we predict an underspend of about £¾ billion. Spending this year will be only about¼ of a per cent. higher in real terms than in 1994–95. Over the whole period of the public expenditure survey, our plans represent tighter spending control than at any time since just after the war, when the Attlee Government were demobilising.
Doing it this way—by real spending control—means that tax cuts are sustainable. In fact, spending controls bring a double benefit: they let people keep more of what they earn; but they also mean government that is smaller, more efficient and less of a burden on people and industry.
As a result of the drive to greater efficiency, we have been able to cut the cash cost of running Government in each of the next three years. Compared with £15.1 billion this year, next year we will spend £300 million less on Government running costs, the year after £530 million less and the year after that £860 million less—a cash cut of more than 5 per cent. In real terms, the figures are even more impressive. By 1998–99, the annual cost of the civil service will be nearly £2 billion—more than 12 per cent.—lower in real terms than today.

Mr. Denis MacShane: If public expenditure and the cost of the civil service are going down so dramatically, why, in a written answer that I received today, has the cost of chauffeurs for Ministers gone up by 50 per cent. since 1991? Will the Chief Secretary set an example and occasionally catch the bus?

Mr. Waldegrave: That sounds like a good subject for a Chief Secretary to look at, and I thank the hon. Gentleman for his helpful indication of where I might look for further savings in next year's expenditure round.
The savings that we have made will not reduce standards of public services. The citizens charter and the competing for quality review have shown that standards can rise with lower costs. We have already carried out 1,000 competing for quality reviews across Government, covering 70,000 staff. More than £1 billion-worth of business has been won by the private sector, with significant reductions in the costs to the taxpayer. The programme of fundamental expenditure reviews and


senior management reviews have led to 20 per cent. cuts in senior staff in major Departments and contributed to the drive for greater efficiency across Whitehall. Other reductions come from better procurement, rationalising functions and reducing the span of Government through privatisation.
Those reductions build on the Government's considerable success in the fight against excessive bureaucracy: holding down running costs and the number of civil servants. There are now 506,000 civil servants—fewer than at any time since the war, 65,000 lower than at the previous election and more than 30 per cent. lower than in 1979. Numbers will continue to fall as a result of those reductions and should be well below 500,000 next year.
I heard the hon. Member for Edinburgh, Central mutter about quangos—quite rightly. They are the next target. Central Departments are just one part of the Government machine that we are committed to modernise. Circling each Department are large numbers of satellite bodies, which are commonly described as quangos. They come in all shapes and sizes. Some spend money and run programmes on behalf of Ministers. Some provide services themselves. Some are regulatory and raise income from fees. The great majority consume taxpayers' money.
The Government have already had considerable success in reducing the number of quangos and improving the efficiency of those that remain, but we intend to make further efforts. We shall review the way in which the administration costs of quangos are controlled. We need to ensure that they are exposed to the same discipline as Departments. We shall consider the scope for further reducing the number of quangos. All are at present subject to periodic review. That process will continue. But we shall look at them in groups to see whether there can be overlaps that can involve removal of whole organisations. We shall help Departments with the effective management of quangos. The efficiency unit in the Cabinet Office will undertake a scrutiny aimed at generating practical guidance on how to improve that efficiency.
The hon. Member for Dunfermline, East spoke about the private finance initiative, and my hon. Friend the Financial Secretary, who leads on that subject, has been talking about the PFI today. In 1979, the public sector was the owner of many loss-making industries, nationalised by Labour after the war, and which Government should never have owned. Our privatisation programme transformed many of them into efficient world-beating companies, like the present British Steel. Today, we face the challenge of achieving similar improvements in services that the Government have a duty to provide, services for which we must keep responsibility: roads, hospitals, prisons, and a whole range of other things. That is where the PFI can be extremely powerful.
That policy is now central to the next stage of the reform of government in Britain. Government are often not the best manager and provider of services, whether they are people-intensive or capital-intensive. A huge prize of more efficient provision, giving better value for money, is available if we can harness business management expertise at every stage, to design, build, finance and operate public services. This gives an opportunity to free the public sector to do the things that

it is best at, for example, an NHS that is focused on core clinical services rather than the maintenance of boilers and the management of car parks.
The PFI is gathering momentum and projects are demonstrating good results. We will have about £5 billion-worth of deals signed by the end of this financial year. The scepticism—as exhibited by Opposition Front-Bench Members—that accompanied its growth has been just like that in the early 1980s on privatisation. Opposition Front-Bench Members will find that the programme will work and, in due course, they will probably come to support it. [Interruption.] As they say, some of them support it already. Some of them advocate it, and one even claims to have invented it—the deputy leader of the Labour party.
We are on course to deliver projects that are worth about £5 billion by the end of March, and there is much more to come. It is not just about capital spending; it is about making the Government more and more a purchaser of public services rather than a provider of capital assets. But even as it is, the policy will maintain publicly sponsored capital at about £224½ billion a year through the survey period—a level, which, in real terms, is higher than almost at any time in the 1980s.
The other reform relates to the extension of challenge funding, which builds partnerships with local authorities, private business and the voluntary sector. Challenge funding has already been a formidable success in tackling urban regeneration, adding £1 of private money to every £1 of public money invested. We want to see that continue and have announced third and fourth rounds of bidding for the single regeneration budget. Challenge funding has also been successful in the Home Office, in its town centre video camera campaign. That is why we are announcing plans to extend it into the regeneration of deprived housing estates; local employment enterprise and training initiatives by the training and enterprise councils; a new challenge fund for the renewal, repair, improvement or replacement of school buildings; and establishing a network of centres to raise standards of literacy and numeracy.
Happily, my job is not all about cuts, though cuts are an important part of good government. Good government is also about priorities and ensuring that money goes where it is needed. For example, the Budget demonstrates our commitment to schools. In total, we will increase provision for schools by almost £880 million. Our plans will extend quality and choice in education by funding, among other things, a major new initiative on nursery vouchers, a doubling of the intake of the assisted places scheme, and enabling banks to offer subsidised loans to students.

Mr. Malcolm Bruce: Will the Chief Secretary confirm that the bulk of the expenditure is to be provided through local authority funding rather than direct Government funding, and that the Government's proposed allocation to local authorities represents no increase in real terms compared with last year? Is not the net effect that education funding will have to come from cuts in local services and an increase in council tax?

Mr. Waldegrave: There are two separate issues. There is a large increase in central Government grant—the aggregate external finance grant—of almost £1 billion and there is an increase in standard spending assessments. The


hon. Gentleman should wait for the Secretary of State for the Environment's statement tomorrow. It will be possible for all education authorities to spend the increase on schools, whatever their budget.
We are launching two new challenge funds to lever in private money to improve school buildings. As I have said, we have £880 million more for schools. The two principal English Opposition parties—to my knowledge the same thing is happening in Scotland—have been—

Mr. Gordon Brown: Not in Scotland.

Mr. Waldegrave: No doubt, different things have been going on in Scotland. The two Opposition parties have been co-ordinating campaigns in the English counties, and probably in Scottish counties, on education spending. I am sure that most of my hon. Friends will have noticed such campaigning.
We have provided £880 million more and it is fair to ask whether the Opposition want to provide more or less. Perhaps the Labour party wants to provide less because it is now a tax-cutting party. It is now outbidding us on tax cuts, so it might want to spend less. Does it want to spend more? That is a fair question. The Member for Dunfermline, East walked straight past all the questions asked by my hon. Friends and I expect that he will walk straight past this one. Does he want to spend more than £880 million on schools this year? That is not a difficult question, but I do not think that we will get an answer.
The same is happening on crime. Since we came to office, spending on law and order has more than doubled in real terms. Over the past two years, recorded crime has fallen significantly for the first time in modern years. That is no accident. Police manpower has increased by over 20 per cent. since 1979. Our plans provide for a further 5,000 policemen on the beat over the next three years and almost 4,000 extra prison places. We have consistently backed the police since 1979 and the Budget does so again.
Can anyone believe that Labour would spend more? Would it spend less? Will we get an answer? I think that the hon. Member for Dunfermline, East nodded. That may be a spending pledge on the police. We should note it. He is now shaking his head, so I think that pledge has been withdrawn.
Our other consistent priority has been health. Next year, current spending on the NHS will go up by about £1.3 billion—over 1.6 per cent. in real terms. The private finance initiative will bring in at least an additional £165 million in private sector investment. I expect it will bring in even more. As always, the NHS will keep what it can save. The hospitals' target in efficiency gains next year is 3 per cent. or £650 million. That means about £2 billion in a tight spending year in extra resources for patients in the national health service. That is the mark of our commitment.
Every Labour spokesman competes with us on health spending. However, when the Labour party was in government, it cut nurses' pay. It is the only party in the history of the NHS to cut spending in real terms. The only year that that has happened since the foundation of the health service was 1977–78. However, our record on health spending is better—we beat the Labour party on health spending. We can do that only because we are tougher on spending on lower priorities. The hon.

Member for Bristol, South (Ms Primarolo) said as recently as last year that she wanted to spend—rather like the Liberals on education—the product of a penny on income tax on the NHS.

Ms Dawn Primarolo: We did not say that.

Mr. Waldegrave: I did not mean "we"; the hon. Member for Bristol, South herself said that she would like to spend the product of 1p on income tax, or about £1.6 billion, on the health service. Since she is now in the Treasury team, she has forgotten about that. She has blotted it out of her memory. The remarkable transformation in the political position of the hon. Member for Bristol, South has been observed with astonishment by those of us in other parts of Bristol in the past few years.

Ms Primarolo: Read out the quotation then.

Mr. Waldegrave: I will send the quotation to the hon. Lady. The Government have a clear strategy. [Interruption.] The hon. Lady is presumably saying that she does not want more spending on health.

Ms Primarolo: That is not the point.

Mr. Waldegrave: It is the point. Does the Labour Front-Bench team want more spending on health or not? I may be mistaken that a couple of years ago the hon. Lady wanted more spending on health. I thought I was complimenting her because as she was—and still is in reality—a good tough left-wing politician, she would have wanted more spending on health. I am now told that I have misquoted her. I apologise and I withdraw that. The hon. Lady did not want any more spending on health. I entirely withdraw those allegations. We are none the wiser as to whether the Labour Front-Bench team wants more spending on health. We will not learn that.
The Budget, like its predecessors, is a Budget for jobs and growth. We are keeping public spending down as a share of GDP and keeping taxes down. We believe that that is the way to get more jobs, a more secure economy and better prospects of sustained growth. We point to the success of the economies that follow that line. Keeping public spending down is fiscally responsible; it continues the process of lifting the total burden of government from industry; it helps to make employing people cheaper; it helps incentives for work by taking many of the lower-paid out of tax; it cuts the burden on small business; and it makes Britain Europe's enterprise centre.
There is a counter-argument. Some honest and intelligent people take a different view; they include the right hon. Member for Chesterfield and the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), as I read in the Evening Standard. People such as Professor Layard and Professor Wynn Godley take a different position. They argue that higher spending, even with higher tax, will achieve what is needed better. That is a perfectly logical and coherent position, but one with which the Government disagree. That is the ever-present argument between left and right.
We have not heard those counter-arguments today from the hon. Member for Dunfermline, East. We have heard no alternative political position whatever. All that we have had is the Labour party advocating more spending when


it talks to the lobbies; less spending when it talks to the City and it wants to look respectable; and income tax at 10 per cent. when it talks to the media. That fools no one.
There are two explanations for what Labour is up to. The first is that it has not really changed its policy at all, but knows that it cannot be elected if it shows its true high-spending colours. That is what the hon. Member for Hackney, North and Stoke Newington (Ms Abbott) hopes when she says that she wants
Labour to win and Gordon can say anything he likes if he thinks that it is going to win the election; but when Labour is in power they will be looking for other priorities apart from tax cuts.
That is what the hon. Lady hopes and believes, but that ascribes such low motives to the hon. Member for Dunfermline, East and to the Labour party that I cannot subscribe to it.
The second interpretation is less Machiavellian and more charitable and therefore the one that I believe. It is that Labour simply has no idea of the implications of what it is doing or saying. All that matters is to look good, like Robert Redford in the film "The Candidate". The hon. Member for Dunfermline, East would be splendid in the role. He might lose a little weight, but he would look very good. The Labour party just strings out the soundbites and who cares if they are contradictory. Like the great Tom Lehrer's song on Wernher von Braun: "Once the soundbites are up who cares where they come down. That's not my department says Gordon von Brown."
Let us compare a few soundbites. The hon. Member for Peckham (Ms Harman) said on the private finance initiative:
It is a privatisation initiative. Its not privatisation by the back door, its privatisation by the front door.
That is for the scares on health privatisation. On the other hand, the right hon. Member for Sedgefield (Mr. Blair) said:
The PFI is right in principle. We have supported it, and in many ways we have been advocating it.—[Official Report, 28 November 1995; Vol. 267, c. 1077]
The right hon. Member for Kingston upon Hull, East (Mr. Prescott) said, "We initiated it." Those are the soundbites for the City and commentators. The hon. Member for Dunfermline, East has said
We also see limited application in provision"—
he is being very statesmanlike here—
for private finance for publicly-led projects in education and health.
That is not what the hon. Member for Peckham says.
The soundbite for those who want tax cuts is "7p up for 1p down". That is a neat slogan. But when it comes to spending, they want more on every major programme, as we heard again today. Do they want to cut borrowing faster or slower? They do not know.
We have just heard the hon. Member for Dunfermline, East promise to do away with a list of taxes which my right hon. and learned Friend the Chancellor had to introduce to bring public borrowing down. He liked none of them, and we had lots of nods and winks that they would all go. Where would the money come from? Having given itself such a contradictory set of slogans, no wonder that the best that new Labour can do is to abstain on the principal issue of this Budget: our judgment that the time has come to return to lower taxes. That is the

result of new Labour. It is firmly based on new principles, but when it comes to the big issue, it manages to come to the decisive conclusion to abstain. That is wonderful.
I shall be interested to see whether Labour Members abstain on the cutting of whisky and beer duties. I expect that they will. We had no answers because they have not decided what to do, which is rather surprising. Nor have Labour Members decided what they will do about the 20p savings rate of tax. They walked straight past that question, too. We had no answer on that or anything else.
To use the words of Dr. John Wells, an honest adviser to an honest man, the late John Smith:
the Shadow Chancellor has been engaged in the truly astonishing feat of trying to present Labour as the Party of low taxation and public borrowing … it is breathtaking. For if a party of the centre-left has any simple guiding economic principle, it must surely be that it stands for a more active state than right wing—and for a bigger share of Government spending in national income".
That is surely right, which is why my right hon. Friends and I are in the Conservative party. We believe in a smaller state and in less Government spending. What anybody thinks that they would support that by backing the Labour party now is as much a mystery to Dr. Wells and me as it must be to the right hon. Members for Chesterfield and for Sparkbrook—an unlikely but formidable alliance.
One thing that I can say for sure is that, if this country were to find itself with a Labour Government elected on such a basis—having promised lower taxes and higher spending, with no theory or ideology of any kind to guide them, and no consistency or plan—it would find itself in a world where the soundbite would avail it of nothing. It is called the real world. Labour would be a broken-backed Government within six months, as they always have been before. Today's speech by the hon. Member for Dunfermline, East was not in the real world. By contrast, my right hon. and learned Friend's Budget, like him, is honest, straightforward, robust, and well founded in a commonsense application of sensible principles. That is why Conservative Members wholeheartedly support it.

Several hon. Members: rose—

Mr. Deputy Speaker (Mr. Michael Morris): Order. I remind hon. Members that Madam Speaker has ruled that, from now on, Back-Bench speeches are restricted to 10 minutes.

Mr. Jim Cunningham: I was interested to listen to the debate yesterday and today.
As some of my hon. Friends pointed out, council tax payers will bear the brunt of the so-called "1p reduction" in income tax. I am sure that many people will be alarmed at that proposal because they will fear for the services provided by local authorities. It has been suggested that extra money will be provided for education, although it has not been made clear whether that will be ring-fenced, so people in local authorities will be extremely worried about the Budget's impact on their jobs. It will threaten jobs, from teachers to cleaners. Even before the Budget, local authorities in some parts of the country, especially Coventry, had already started looking at jobs, pay and conditions. That did not bode well for lower-paid


employees, or the education service and other services. So I imagine that many people in Coventry will be alarmed about this Budget.
The Budget did not do much for the unemployed, and I saw no reference to investment in young people. Rather, it contained punitive measures against young people as benefits will again be cut. Once again, young people are the whipping boy. One-parent families and old-age pensioners will also carry the brunt of this Budget.
Over a period of years, the Government encouraged many people, particularly young people, to take out mortgages. Unemployment now threatens their ability to pay those mortgages. Worse, the Government, who say that they support a property-owning democracy, have cut mortgage relief over the past two or three years. If one goes further down that road one notices a little thing called negative equity. The Government have hung a millstone round the necks of many young people who want to own their own homes, yet they call themselves the Government of hope.
Much has been made of the new initiative, which is actually an old initiative—it has certainly been around for a number of years—called "city challenge". I had always thought that the scheme was designed for the inner cities. The problem is that it is a lottery, so it will not tackle some of the major problems of the inner cities as the Government claim. On the contrary, leaders of city councils may have to wait 10 years before they see results using that method of pouring money back into our inner cities.
The Government have also made great play of the fact that, over the next two or three years, they will employ 5,000 extra policemen. When that figure is broken down, one sees that cities like Coventry will be lucky to have between 10 and 15 extra policemen. We need more than that to tackle some of the crimes committed in parts of the inner city that I could mention. Ministers have come to Coventry and insulted parts of that city and its population.
The Government propose to cut some £2 billion from the social security budget. Given that £3.5 billion has been cut over the past two or three years—the past two or three Budgets must be taken together—it means that £5 billion or £6 billion will have been taken from the social security budget.
The Conservatives claim to want to help the poor and say that they are the compassionate party, but over the past two or three years they have cut housing benefit, which does not help one-parent families, the poor or the homeless. One has only to talk to people who work for charities in any major city to find that, rather than assist organisations like Shelter, or the Cyrenians in Coventry, the Government have cut resources for staff which those organisations badly need. Those organisations not only house the homeless but deal with people with drugs problems. The Home Secretary said that he intends to set up a special task force to deal with drug abuse. If we leave out MI5, that task force must be funded, but there is no reference to it in the Budget.
The Budget does nothing for industry or to expand our industrial base. Conservative Members often talk about wealth creation, but when it comes to putting their money where their mouths are, they do nothing to help industry, which is crying out for help. It is no good simply tinkering

with small measures like corporation tax. The Government must come to grips with the needs of industry, which include money for research and development, and for training. Where will future generations go to learn their skills? The Government have no proposals on that.
Except for a few hundred houses built while the Government have been in office, when was the last time that council house construction took place or cheaper housing was built for the less well-off? Instead, the Government have introduced a punitive Budget. That is the only way that it can be seen. It is not designed to help the needy, the unemployed, new home owners or local government. Rather, this Budget—I presume that next year's Budget will do the same—is all about tax cutting. That will benefit no one because the Government still owe the public £650 a year, or another 6p, which they robbed them of. They should not forget that yesterday's Budget did the public no big favours. They owed the public that cut in income tax because they ran the country into a £50 billion debt. The Government have the effrontery to tell the British people that they are doing them a favour with these tax cuts. They are not a favour, and the sooner the Government decide to go, the better for everybody.

Mr. John MacGregor: For the record, I have declared in the Register my outside interests, although I do not think that anything I shall say will have a direct impact on them. I congratulate my right hon. and learned Friend the Chancellor on his wise, shrewd and balanced Budget. He is right not to take any risks with inflation or interest rates. The tax reductions have been shrewdly chosen and have many good targets, and I support the priorities of education, health and the police.
There is much that I should like to say, but in view of the time limit I shall confine myself to a few comments. I particularly draw attention to the measures for retirement incomes and the provision for long-term care. We all know the issues—demographic patterns and the fact that people living longer creates health problems in later life—and we all know about the high cost of community care. That may become one of the most potent political issues over the next 20 years.
The Chancellor has started to tackle the short-term problem of the feelings of many people who have saved throughout their lives only to see their savings eroded to meet the cost of community care in residential homes. The cost of that may also include the family home. Therefore, I warmly welcome the increase in the capital thresholds from £8,000 to £16,000 and from £3,000 to £10,000. That will bring relief to many people with modest savings. Many such people spoke to me while I was making speeches on that issue in various parts of the country.
The perception that the family home may have to be sold worries people. That does not always happen, but frequently it does and in due course I should like to see the family home exempted from the needs calculation for meeting the cost of retirement care. At least the Budget has introduced a good measure.
In the context of short-term issues, I welcome the reduction on savings incomes to 20 per cent. for basic rate taxpayers. It will affect mainly retired people because they are the people with building society deposits and a small amount of equities. The significance of that measure is


shown by the actual cost in tax relief, which is £800 million. It is a significant measure that will help many retired people, but the long-term problem is much more formidable. It is essential to start to tackle the issue by encouraging many more families who can afford it to start saving through personal pensions and long-term insurance schemes—not just through TESSAs and PEPs—to meet the cost of retirement care.
At the moment, only 10,000 to 15,000 insurance schemes are being taken up but I have no doubt that in the next 20 years there will be a much greater need for such schemes. That means introducing tax relief measures to encourage people to save more. I am delighted that consultation documents are to be produced and that a couple of measures have already been suggested. A range of options is possible and I hope that over the year ahead we shall introduce them. An important actuarial point is that the earlier people start to save, the less they need to pay and the more benefits they will receive at the end of the day. Every year lost in encouraging people to take out policies for retirement care is a year lost for many families. Through tax measures and constant education, it is necessary to change the culture among the younger generation towards this issue, because it will have an impact on them. I am glad that the Budget took a step in that direction.
The second issue also relates to savings and I shall couple it with the Chancellor's remarks about the need for tax simplification. That does not just mean explaining tax measures to make them simpler for professional advisers and the public at large. We need to simplify the underlying structure of the system. In that respect, I should like to highlight capital gains tax. I welcome what has been done about inheritance tax and I hope that capital gains tax can be tackled next.
The right step on capital gains tax is not to abolish it altogether because there is a real issue in terms of the early years. The right approach is to taper capital gains so that the assets and the capital gains move quite swiftly, say within seven years, out of the tax system altogether. That is a much simpler way to deal with the issue than the current one and I hope that the problem can be tackled.
The third issue relates to the expenditure plans and it is the source of some disappointment. As a former Chief Secretary, I am fully aware of the difficulties that face any Government every year. I have been in several spending Departments and on the other side of the table, and I understand all the issues. I congratulate the Chief Secretary on his reductions in the overall expenditure plans this year, although part of the contribution is from the contingency reserve. I am sure that he will be very tough on that reserve in the year ahead.
I support the plans for education, health and the police and it would be churlish of me to single out the area in which I am critical of what has been done. Nevertheless I shall do so to highlight it for the years ahead; it relates to the roads programme. I strongly support the private finance initiative on roads and the concept of design, build, finance and operate. I started them and thought that they would be important in the years ahead. I hope that in due course motorway tolling can be linked to them to produce resources that will enable us to ensure a significant future roads programme. However, I do not think that the PFI and DBFO will be enough over the next three or four years.
A substantial number of road projects have been cut as a result of reductions in the programme. That worries me, partly because all over the country there is a need for more bypasses for environmental and other reasons, to relieve towns and villages that are hard pressed by traffic, but also because if we do not maintain a decent roads programme, congestion costs on businesses and the economy will start to grow again. Of course, a cut in the programme also has an impact on the construction industry.
Over the past 15 years a considerable number of bypasses have been built in my constituency and they have been of major benefit to all my constituents. There have been big improvements to the trunk roads in Norfolk, which were much needed for our economy. We have benefited substantially, but more bypasses are necessary and further improvements, by which I mean mainly widening of the main motorway and trunk road network throughout Britain are required. I hope that in future the Chancellor will look again at the impact of his measures on the profile of the roads programme to see whether more can be done.
My final comment flows from what the Chief Secretary said in the final part of his speech. In 1987 I was the first Chief Secretary to cost the Labour party programme and I remember the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) looking absolutely astonished at the scale of the programme to which his Front-Bench colleagues had committed him. Over the past few years we have been able to demonstrate clearly that Labour is the high-tax, high-spending, high-borrowing party. It has not changed and I was astonished by the effrontery of the Leader of the Opposition and the hon. Member for Dunfermline, East (Mr. Brown). They have put together a number of tax increases and have clearly implied to the public at large that they will reduce them although, of course, we know that they will not. They attack quite a large number of increases in fares or charges—the hon. Member for Dunfermline, East did that in the debate—and imply that they would not have occurred under a Labour Government. All over the shop Labour is still committing itself to spending. The hon. Member for Oxford, East (Mr. Smith) shakes his head, but I understand that within the past month 40 per cent. of all Opposition speeches have urged higher spending and that clearly shows what they will do.

Mr. Darling: Will the right hon. Gentleman give way?

Mr. MacGregor: No. I am almost finished.
Labour is trying to con the electorate into thinking that it would be a low-tax party as well because Labour Members know that that is politically attractive. However, when one examines the totality of their proposals, it is clear that that could not happen under a Labour Government. They would be back to high tax, high borrowing and high spending. On 10 November, the game was given away on "Clive Anderson Talks Back" by the right hon. Member for Chesterfield (Mr. Benn), who said that at present the Labour party did not want to cause trouble internally because it wanted to return to government, but that when
we come to power then you'll find the Labour Party is the same Party it's always been.
That is true. Therefore, the charge of the Labour party being a high-spending party—

Mr. Deputy Speaker: Order. Mr. Malcolm Bruce.

Mr. Malcolm Bruce: Following the right hon. Member for South Norfolk (Mr. MacGregor), I support the principle of cutting the roads budget, although we think that the money should have been switched to public transport. I agree with him, however, that that cut should not be at the expense of long-overdue bypasses. It would have been extremely damaging if, as was suggested a little while ago, the Government had frozen all road projects that had not been started. I live in a part of the world where the population has grown by 50,000 in the past 10 years. A number of planned bypasses are just at the point where they should be started and I hope that they will not be further delayed.
I apologise to the Minister who will reply to the debate because, due to a previous engagement, I will not be here for his speech. No discourtesy is intended. No doubt he will take a free kick at the open goal.
This is a cautious Budget because it had to be. The Chancellor of the Exchequer knows that the economy is so sluggish that the most important thing that it needs is a drop in interest rates. The Chief Secretary to the Treasury alluded to that and I understand that today the Confederation of British Industry called for a cut in interest rates. I hope that enough room has been created for that to happen. In my alternative Budget, I made it clear that getting interest rates down was the single most important economic priority.
The other problem and the reason why the Budget had to be cautious is that, although not quite in the terms that the Chief Secretary set out, to some degree, borrowing is out of control. If the Chancellor was not to cause alarm bells in the markets, he had to demonstrate that any changes that he was going to introduce were properly balanced and properly funded.
Having said that, there is a degree of dishonesty in the way in which the Budget has been constructed and presented. The most specific point is that the borrowing position does not justify the standard rate of income tax cut that has been driven by a political imperative that does not square with the Government's analysis last year. The Chief Secretary's predecessor, speaking in the Budget debate just one year ago—bearing it in mind that he was talking about a forecast public sector borrowing requirement deficit of £21 billion for the current year, which is £1 billion less than his successor is forecasting for next year—said:
at those levels of borrowing, no prudent domestic or international observer of the British economy should have expected to see tax cuts … it is far more important … to be right than to be popular"—[Official Report, 30 November 1994; Vol. 250, c. 1237.]
That is obviously true until one gets to within 18 months of a general election, when clearly it is far more important to be popular than to be right. In the circumstances, inevitably the Chancellor of the Exchequer has been pulled in that direction.
The Chancellor's own wise men have given him some sort of shot across the bows. In the Financial Times today, Mr. Gavyn Davies of Goldman Sachs says:
The target for the public sector borrowing requirement next year … is too high, and should not really have permitted sizeable tax cuts. Also, we have probably reached the point where spending plans have been cut so much they become implausible.
That is where the Chief Secretary's mettle will be tested. It is much easier to cut off the forecast figures than to deliver them at the end of the day. I am not saying that

he will not achieve that, but the specifics of how it will be done have not been set out. In a pre-election year, when unpopularity faces the Ministers who preside over cuts, I predict that he will have difficulty delivering them. Consequently, his borrowing forecasts may yet turn out, as they did last year, to be more optimistic than he hopes.
Apart from that, the dishonesty involves the fact that on analysis the education commitment is nothing like as generous as the Chancellor sought to make it. The Chief Secretary stated that this was the commitment—from central Government sources, it appears that all that the Government are offering is funding for their pet schemes: the assisted places scheme and the nursery voucher scheme. All the rest of the funding must come out of the local government settlement.
The Chancellor wished to portray himself as a one-nation Tory keen to protect public services when in reality the best that he has done is hold the health budget just about to real health inflation. Although he has put some additional money into increasing the number of police officers, it is a phased introduction and £20 million is not a huge sum in the context of the Budget and it is against the background of cuts elsewhere in the Home Office budget.
Nevertheless, we welcome and will support some modest measures in the Budget. In particular—here I take up the comments of the right hon. Member for South Norfolk—the threshold adjustment and the help for the elderly who need long-term care are needed. Some imaginative new proposals, which again were alluded to, go in the right direction for encouraging people to make provision for themselves and for giving them an incentive to do so.
Not surprisingly, I welcome the 27p reduction in duty on spirits. The Chancellor of the Exchequer did not acknowledge that that was a reversal of the 26 per cent. increase that he introduced last year in a fit of pique after he was defeated on the VAT on fuel issue. Over time, whisky has consistently been our biggest export and home sales have suffered. I am not sure that the Chancellor was being that magnanimous because the indications I have are that his revenue fell as a result of the impact of the tax last year. I hope that he will stop there, listen to the Scotch Whisky Association and reduce duty on spirits so that it is more in line with the alcohol content and the gap is narrowed between beer and wine.
Overall, the Budget is something of a damp squib. For the reasons I have stated, the cut in the standard rate is not justified. We have consistently stated that we believe that education could be funded. We have said that, if necessary, we would increase taxation for it and we will vote against the 1p reduction in income tax and challenge others to support us in so doing.
The Budget's most alarming feature was the uprating of the Government's borrowing forecast. That took even independent commentators by surprise. We knew that it was bad, but not as bad as that. The Chancellor is forecasting that next year's borrowing deficit will be greater than his forecast for the outturn this year. This year's outturn is forecast to overshoot by £7.5 billion. The 1997–98 figure shows borrowing at £15 billion, which is three times the level forecast in last year's Budget. In the past 10 years, the average error in PSBR forecasts has been £11 billion per annum, so it is a big variation and not a firm foundation for definite decisions.


Frankly, the figures are awful and for the reasons that I have stated they could turn out worse. In addition, the wise men do not agree with the Chancellor's forecast that he can achieve 3 per cent. growth. They forecast 2.7 per cent. I hope that the Chancellor is right because clearly we want the economy to sustain higher levels of growth.
After 16 years in government, the Tories have not found the holy grail of sustained economic success. Some things are being done. Reform of the trade unions has been very much for the better and my party supported most of those proposals.

Mr. MacShane: It would, wouldn't it?

Mr. Bruce: Indeed it would because we believe in democracy, in industrial democracy in particular, and that the country has been dramatically improved as a result of those industrial relations reforms. I understand that the leader of the Labour party and Labour Front-Bench Members also support them, although they fought them all the way at the time.
The Government have also perhaps helped to deepen the understanding of certain fundamental economic realities such as that enterprises must ultimately make a return on capital if they are to survive. Having said that, the Red Book confirms that the post-war average growth rate of 2.5 per cent. is all that has been delivered under 16 years of Conservative rule. Although there are some important improvements in the underlying economic indicators, we have not yet got to the point where we can say that there is real confidence that permanently low inflation has been achieved.
When the Prime Minister says that inflation is in the box, he is being a little complacent, given the sluggish state of the economy, which is a major fact or in keeping it under control. As a result of that, the Government have not got to the point where we can say that we have stable and competitive interest rates. One of the reasons is that the Government insist on keeping interest rates under political control. All the indications are that that keeps them at a higher base rate than they would be if they were taken out of the immediate political arena, as we Liberal Democrats would wish.
Those may be some of the reasons why investment is low—and it is low, historically, across the board. Last year the Treasury and Civil Service Select Committee was sceptical about Government claims that business investment would be 10.75 per cent. Sure enough, that figure was revised to 3.25 per cent—and the investment forecast for the whole economy was revised from 5.75 per cent. to 1 per cent. Although manufacturing investment is on the increase now, that is after a deep recession. As a percentage of GDP, it is still at an all-time low.
The Government are cutting their own capital spending as a means of helping to get their borrowing under control and trying to justify tax cuts. The private finance initiative has been launched many times, and was originally hailed as a way of boosting public capital spending. The hope was that it would unlock additional resources.
However, the Red Book shows that the forecast increase in the PFI is exactly offset by the forecast cut in the Government's contribution to capital expenditure, so the PFI is now directly substituting for what the Government would have done, and there is no net benefit in terms of the capital expenditure that might have been delivered.
The Chancellor and the Government talk about getting expenditure below 40 per cent. of GDP, but unless they are prepared to explain it, that is a meaningless figure plucked out of the air. If it is to be achieved by economic success, that means reducing unemployment and increasing earnings so that there is less call on the welfare budget, which is obviously the biggest single factor outside the Government's control.
If that is the plan, we need to know what policies the Government have, which they have not shown us over the past 16 years, to achieve that transformation. But to date they have totally failed to deliver. If there is no such magic new policy—there is certainly no evidence of one—the Government can mean only that they favour transferring more of the cost of health, welfare and public service provision to the consumers of those services. Presumably the provision to some of the most vulnerable people in our society will be reduced too—witness today's earlier benefits statement.
If that is what the Government are about, their argument may be perfectly honourable and justifiable, but it is not honest simply to call for public expenditure to he cut to 40 per cent. of GDP or below, without explaining how to achieve that. The Budget was a blatant attempt to sell a false prospectus.
First, the Government claim that there is room for justifiable and sustainable tax cuts, when patently there is not yet. They also claim that spending on health, education, and law and order has been increased. Health has been protected, but spending on law and order has been frozen and, unless the Chief Secretary to the Treasury can clarify the position for me, I shall continue to believe that real investment in education has, if anything, been barely maintained, and may still end up cut.
The Government claim to be providing a big funding boost for education, but they are doing nothing of the kind. That confidence trick involving education makes Liberal Democrats especially angry, because in our alternative Budget we made a commitment to a £2 billion boost as a minimum requirement for education—to deliver the nursery education that all parties claim to want, but for which only the Liberal Democrats are prepared to identify the funding, to reduce class sizes, and to provide more funding for books and materials, and better-quality further and higher education.
The Government claim that education will be boosted by £878 million. But the direct Government contribution will be enough only to finance their pet schemes, nursery vouchers and assisted places. All the rest is to come from the local. authorities. The trouble is that this year's allocation to local authorities does no more than reverse last year's cuts. The Government are simply putting us back where we were a year ago.
Even working on the proposals for this year alone, the figures do not stand up. The Government say that there will be a 3.1 per cent. increase from last year's reduced total Government grant support to local authorities. Out of that, plus their council tax income, local authorities are expected to find an extra 4.5 per cent. for education. As education accounts for about half local authority spending, that means that 2.25 per cent. of the 3.1 per cent. increase should be earmarked for education.
It does not take a mathematical genius to work out that that leaves only 0.85 per cent. for all the other services—a real cut of almost 10 per cent. That means drastic cuts


in local services such as community care, home helps and other essential local services. It also means that council tax will have to rise, and I gather that there is to be an announcement about that.
So the Government's proud boast of taking a penny off the standard rate of income tax has been made at the cost of a dramatic increase in council tax.

Mr. Waldegrave: indicated dissent.

Mr. Bruce: The Chief Secretary to the Treasury is shaking his head. Perhaps he would care to tell me why in the Red Book the Government forecast an increase of £900 million in council tax income. That is clearly a sign that they intend to lift the caps, and that they expect local authorities to increase council tax to close the gap.
The Government hope that somehow or other they will gain the credit for cutting taxes, and still be able to claim that they have increased funding on education, while the local authorities will have to deliver the money and put local taxes up. That is dishonest; it is a sleight of hand—although it is probably typical of what one might expect.
Government spokesmen have acknowledged the fact that we Liberal Democrats have set out our priorities for the current year in our alternative Budget, which is more than can be said for the official Opposition. We have made clear our desire to have reduced interest rates and permanently low inflation—we agree with the Chancellor about the importance of that. We also stress the importance of bringing borrowing under control. I rather suspect that, because of the pressures that the Chancellor is under, we are now more concerned about that than he is.
We have set out our priority for an extra £2.5 billion for education, including £500 million to be spent on the fabric of our schools. We propose to take 750,000 people out of tax altogether, by introducing a 50 per cent. tax on earnings above £100,000. We would also harmonise the national insurance and tax thresholds. Disappointingly, the Government have left that area unreformed for a long time.
We would boost public transport, research and development, health, community care, overseas aid, child care and the spirits industry rather more than the Government have. We would also introduce specific measures to get the long-term unemployed back into work.
Those are costed, responsible priorities. What a contrast to the official Opposition. Both the other parties are off on the fantasy of trying to persuade voters that we can have higher spending, lower taxes, safe borrowing and a healthy economy.
The Labour party appears to have written its economic policy in Disneyland. It attacks the tax cuts on the ground that they are not enough, yet intends to abstain rather than support them. If Labour Members want tax cuts, why do they not have the guts to support them? If they do not want them, surely they should vote against them.
The Labour party explains nothing about how it proposes to cut tax, yet at the same time pledges more funding for education, health, transport and all kinds of welfare benefits. Labour says nothing about borrowing, inflation or interest rates. It wants to defy the laws of economics, and probably the law of gravity too. In its

flirtation with Murdoch the Labour party should remember Icarus, who found that when someone flies too near the "Sun" he comes to earth with an almighty crash.
I believe that British voters are understandably disillusioned with politicians who make false promises that cannot be sustained because they never stood up in the first place. The Liberal Democrats' message is simple: "You know you get nothing for nothing. Good things have to be paid for. If tax cuts are to be sustainable, the economy has to have delivered the fruits of success. So if you vote for the economic policies of either Labour or the Tories you are doomed to disappointment. Liberal Democrats could make all the difference."

Mr. John Townend: The Chancellor of the Exchequer has shot the fox of the hon. Member for Dunfermline, East (Mr. Brown), who expected to be able to stand up and condemn him for a giveaway Budget and an attempt to bribe the electors in order to win the general election. Clearly the hon. Gentleman got it all wrong, because one would not get an enormous number of votes with tax cuts of £3.25 billion.
My right hon. and learned Friend has acted fiscally responsibly over tax cuts, because he has matched them pound for pound with spending cuts. That should please the markets, and it will give my right hon. and learned Friend a window of opportunity to cut interest rates in weeks rather than months.
That is vital if the Government are to achieve their target of 3 per cent. growth in 1995. Growth has slowed in recent months. The housing market is flat, the construction industry is in decline, retail business in the high street is weak, business confidence is dropping, and exports are slowing. So a boost to business confidence and consumer confidence is needed. By themselves, £3.25 billion-worth of tax cuts are not sufficient. They need to be accompanied by lower interest rates.
The Budget should not be judged in isolation. There will be another Budget before the election, and it is imperative that the Government continue to cut public expenditure so that they are in a position to make further tax cuts next year. With regard to specific tax changes, I strongly welcome all of them. They will be especially welcomed by the public who have had to bear three years of tax increases. I should like to mention one or two of those changes.
I am particularly pleased with the help to be given to businesses and small businesses. The marginal relief on business rates is to be welcomed, although we should look at the whole basis of the calculation of valuation of small shops for rent. At present, they are disadvantaged compared with large shops and supermarkets. The lower corporation tax is also welcome, but, above all, the abolition of inheritance tax on private businesses is long overdue. When the Opposition were in power—there is no doubt about it—many fine private family businesses had to be sold because of the old death duties.
As a third-generation wine merchant, I am delighted that my right hon. and learned Friend the Chancellor has cut whisky duties. I am also relieved that there have been no further duty increases on beer and wine. But the long-term problem of higher duties will have to be dealt


with—I had hoped that this year the Chancellor might have made a start—because smuggling is increasing rapidly.
What worries me, with my experience of the industry, is that criminal elements are becoming involved. We all remember what happened during prohibition in the United states when the Mafia got involved in the drinks industry. The Mafia did not go away when prohibition ended. At some stage we shall have to deal with the problem. We cannot have an open market. Our own industry has been put at a disadvantage. We do not need to come down to the level of duties of the continentals, but we need to halve the difference. We could do that at one stroke if we put 1 per cent. on VAT. I do not expect my right hon. and learned Friend to do that. Nevertheless, the problem will not go away.
As a Member who represents a constituency where retirement is a major industry, I agree with my right hon. Friend the Member for South Norfolk (Mr. MacGregor) and strongly welcome the changes with regard to the level of assets in old people's homes.
I turn to direct taxation, which is one of the most important aspects of the Budget. I do not think that it has got home to many people that we now have a basic 20p tax rate for all savings. On all savings—in building societies, banks and shares—people will pay only 20 per cent. tax. That is a great achievement. The widening of the band brings the day nearer when the majority of people will pay a 20 per cent. tax rate.
We have heard all about the so-called 10 per cent. rate that the Labour party is proposing. It is a confidence trick. I have been on a number of media shows—television and radio—in recent days with members of the Opposition. One member of the Opposition Front-Bench team said, when challenged about how much the rate would cost, "Ah, but it is only going to be a band." A band can be as little as £500 or £1,000, which would produce only a 10 per cent. tax saving. The proposal is a confidence trick, and it is dishonest.
There is complete chaos in the Labour party. I was also on television with the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), who said that Labour should cut taxes at the low end and pay for them by increasing them at the upper end. I think that the right hon. Gentleman represents—probably—more members of the Labour party than the Leader of the Opposition.
I want to say a little about spending, because, in view of my long-expressed views, I am naturally disappointed that reductions in public spending were not greater. I am a little perturbed that the results of the very good work done by my right hon. Friend the Chief Secretary to the Treasury on cutting departmental spending were completely absorbed by increases in the priority areas of education, health and the police. All the tax cuts were financed by reductions in the contingency fund.
However, it would be churlish to ignore the Chancellor's achievements, for this is the first time since Mr. Healey capitulated to the International Monetary Fund and cut spending over two years by 8 per cent. in real terms that general Government expenditure has been cut in real terms by 1 per cent. If that was the beginning of year-on-year reductions, I would be delighted. However, I find it disappointing that, after a 1 per cent. cut this year, the Red Book shows that, in the following two years, spending is set to rise again by half a per cent. each year.
The Government must give priority to reducing taxation. If one turns to page 88 of the Red Book, which shows tax revenue as a percentage of rises in gross domestic product, one sees the mountain that we have to climb to return to a lower tax regime. In the four years to 2000–01, tax as a proportion of GDP is projected to rise to 39 per cent.
We have to kill the doctrine of the inevitability of rising public expenditure. We need to change the culture in the public sector of "what matters is what we spend"; that things will be better if we spend another £1 billion on health or on education. We should concentrate on output, and what is achieved. When one considers how much we are putting into education, some of the recent reports on the standard of reading and spelling are very worrying.
We must judge a service on its output rather than its input. In the long term, we must take a long, hard look at spending on education and the national health service, as we are doing with the social security budget. There is no doubt that, although they are priority areas, they are very big organisations. I am sure that there is as much waste and over-management in those areas as there is in any other.
We still have a few sacred cows. In overseas aid, there have been no cuts in bilateral aid, and the Red Book says that we are the fifth largest donor in the world. We are also told that we are the 18th wealthiest country. Furthermore, some of the money donated is wasted. "The Cook Report" on television last night was very interesting, because it showed that £1 billion has been wasted in Albania.
I draw my right hon. Friend the Chief Secretary's attention to the fact that he should look next year at Scotland, Wales and Ireland. We all know that expenditure in Scotland costs 30 per cent. more per head than in England. Expenditure in England is just over £2,000 a head, in Scotland it is £2,900 a head, and in Wales it is £2,365. Yet expenditure per head in Northern Ireland is more than £5,000 a head, which is set to be increased under existing plans by adding £130 million this year and £190 million next year to the budget. There should be a peace dividend from Northern Ireland—at least they are not blowing everybody up.
We have started on a long journey to bring taxes down eventually to below the level they were at the last election. That must go hand in hand with reducing spending as a proportion of GDP and progressively continuing to move, as my right hon. and learned Friend the Chancellor plans, to a balanced Budget.
We have no differences in our party on those aspirations. My right hon. and learned Friend and I agree. The only slight difference we have is the speed at which we travel. But it is vital that we make a major stride forward in next year's Budget and then set out our programme for the next five-year Parliament to bring taxation and spending down in the long term to or below 37.5 per cent. of GDP. I strongly support all the taxation measures in this Budget.

Mr. Thomas McAvoy: We have just had a demonstration of what the Chancellor called "the slash-and-burn tendency". The remarks of the


hon. Member for Bridlington (Mr. Townend) about Scotland and Wales, and especially about Northern Ireland, were clearly misjudged.
I regret that the Chief Secretary is not in his place, since I took what he said at the start of his speech as a serious confession. He said that he had attacked the Government in 1980 purely and simply to get a job with them. Of course, he eventually succeeded. It certainly told me a great deal about his inner strength.
The right hon. Gentleman is the Chief Secretary of a Government who have increased taxes over the past three years, after they made an election manifesto commitment not to increase taxes. Some measure of humility might have been in order. Although it might have been hard for someone from the Chief Secretary's class to make an apology to the country, he might have said with some humility that the Government were responsible for those tax increases. The nemesis of the Government will come sooner or later, but it will certainly come; and the Chief Secretary's nemesis may come even sooner.
The Chancellor realised early on that the British people would not be fooled by the tax cuts that his Back Benchers wanted. He knew full well that to come up with those tax cuts, even against the fiscal advice of his own Back Benchers, would have told on him, because the Government still have around their neck the fact that they have increased taxes by the equivalent of 7p on the basic rate. I know that they do not like us to repeat it, but that figure should be repeated again and again. Even after the Budget, with its certain level of tax cuts, a typical family will still be worse off by £670 per annum. That is the measure and the achievement of the Conservative Government.
Another reason—I hope, the most important reason—that the Chancellor took into account in his decision not to cut taxes further was the amount of debt that the Government owe. For years, the Labour party has had to withstand lectures from Conservative Members that it was not fiscally correct, could not run a Government, and could not handle the finances of a Government or run the country. When I think of black Wednesday and the state of the Government, I am not inclined—more importantly, the people of this country are not inclined—to listen to lectures from any Conservative Member, and especially from those on the Government Front Bench, with their record of running the country.
I do not see anything in the Budget to help industry in my constituency. The Hoover domestic appliance plant, which has an excellent export record, is in my constituency. I do not see any measures to help that company to operate and expand its market. The company and its work force have an excellent export record. I do not see any measures from the Government to help such companies. There is not much joy for my constituents in the Budget.
The hon. Member for Bridlington mentioned spending in Scotland. It is a fact of life that the Scottish Office, according to the expenditure plans announced yesterday, faces a sharp reduction in its annual budget over the next few years as a result of an overall cut in Government spending. Although the Secretary of State for Scotland—as a tactical move—chose to stress that the £173 million

increase in cash terms in next year's total allocation was the highest ever, the fact is that the amount of money allotted pro rata to the Scottish Office has been reduced.
The Secretary of State has failed to fight his corner, and he has failed to fight Scotland's corner. The figures show that the Secretary of State for Scotland has had to accept a £320 million cut in real terms to next year's budget, and his Department faces cuts rising to 5 per cent. in the financial year 1998–99. The Secretary of State has failed to fight his corner against the Treasury.
I echo some of the comments made by a former Secretary of State for Transport, the right hon. Member for South Norfolk (Mr. MacGregor), about cuts in the roads programme. I am a member and a supporter of the west coast main line group. I support rail services. I do not support motorway madness or roads for their own sake.
The fact of life is that the economic life of this country depends on an efficient road system for industry and commerce. Now we have a £4 billion brake on new routes because of cuts in that programme. That is purely and simply a short-sighted, short-term measure to respond to an immediate situation. The Government are putting off the evil day, because they think that we can do without the roads for another year or so, but damage will be done to haulage, freight companies and the economy as a whole because delays and traffic jams result in so much cost to the country. The Government's decision is short-sighted.
I know that the environmental lobby will argue, with some justification, about a reduction in road traffic. The Government have not mentioned the excellent report by the RAC, in which it suggests ideas which would cut car journeys by 20 per cent. I am in favour of cutting car journeys. It is ridiculous that an organisation such as the RAC, in a genuine attempt to tackle the problem of traffic, can come up with innovative ideas and methods that sometimes go against the interests of the car owner, when all that the Government can come up with is a £4 billion cut in the roads programme.
The hon. Member for Gordon (Mr. Bruce) is not in his place. He was in the Chamber for some time, waiting to speak. I am sorry that he is not here. I am sick to the teeth of the hypocrisy of the Liberal party, which preaches one thing in one area and something else in another. The hon. Gentleman said that his party was in favour of cutting the roads programme, yet the Liberals make a special case wherever it suits them to do so. In my constituency, the Liberals are campaigning against a project to complete a 12-mile motorway link. I welcome the hon. Gentleman's comments, but some motorway building is essential.

Mr. Eddie Loyden: Does my hon. Friend think it a good idea that we should begin to consider reviving the coastal merchant fleet? It is the most environmentally acceptable method of transport and one that we should fight for. Places in Scotland and the rest of the United Kingdom would benefit from shipbuilding. Coastal vessels could transport most of our goods around the coast without all the environmental problems that roads bring.

Mr. McAvoy: I am grateful to my hon. Friend for that brief intervention—I think. I look forward to intervening in his speech at some point, especially during a 10-minute limit on speeches. My hon. Friend's point is correct. We have under-utilised resources and methods of transport


such as that mentioned by my hon. Friend. The Government's short-termism has failed to take account of that.
Of all the Budget measures announced by the Government, the one that describes the Government and their ethos best is the cuts in special benefits for lone parents and in housing benefit for the under-25s. That is a disgrace. The Chancellor claims to be a one-nation Tory. The nation will pay the price of treating its young people in that way, and the Government will certainly pay the price, too. Despite the Government's efforts to discourage that section of the population from registering, young people will fall over themselves to make sure that they are registered somewhere in time for the next general election. That will be their chance to seek revenge on the Government.

Mr. Robert Hicks: The Budget confirms that my right hon. and learned Friend the Chancellor is determined to secure sustainable economic growth in a low-inflation environment. If, as a consequence of the measures announced yesterday, we can expect further reductions in interest rates sooner rather than later, that is to be welcomed.
Much has been written and spoken about tax rates. Given my right hon. and learned Friend's approach and his wish to help specific sectors of the economy and particular groups, he was right to limit the reduction in the standard rate to 1p. As the parliamentary representative for a low-income area, I have always argued that in a tight financial situation it is more important to increase personal allowances than to cut tax rates. I welcome my right hon. and learned Friend's decision to increase personal allowances above the level of inflation.
I am pleased about a number of other measures, one of which specifically relates to the proposed assistance for people in residential and nursing homes. The existing financial arrangements are certainly too harsh in their application, and they undoubtedly penalise the thrifty and cause widespread anxieties among families. On public expenditure, I welcome the Chancellor's decision to make additional financial resources available in real terms for education, health and the police. There will be widespread public support for that decision.
The purpose of my speech is to make a number of comments about public expenditure as part of the unified Budget as it relates to the economy of the south-west, and Devon and Cornwall in particular. The House will know that, historically, the economy of Devon and Cornwall has been dependent upon primary activities such as agriculture, fishing, mining and quarrying, and later on tourism and defence.
The south-west is the most dependent of all the United Kingdom regions on defence and defence-related economic activity. The changes in the United Kingdom's defence requirements have led to the loss of some 21,000 defence-related jobs in the past 10 years, with further reductions of 20 per cent. forecast between now and the year 2001. The loss of income to the local economy through defence reductions is estimated to be in excess of £500 million.
Unemployment levels in Devon and Cornwall are traditionally higher than in both the official south-west region and the United Kingdom as a whole. Forty-eight per cent. of the travel-to-work areas in Devon and Cornwall feature in the worst 33 per cent. of the United Kingdom's unemployment black spots. Conversely, average earnings in the area are significantly below the United Kingdom national average. In my constituency, average earnings are 16 per cent. below the national average.
It is often said that our cost of living is lower. I wish that that were the case, but nothing could be further from the truth. The cost of living in my area is some 8 per cent. above the United Kingdom average, and this is compounded by the wide discrepancy in average council tax bills. For example, the average council tax bill in Cornwall last year was £447, which was 51 per cent. above the average in South Glamorgan. I would hardly consider Cornwall to be a spendthrift county, and it is more likely that this significant differential reflects a more favourable grant settlement for Wales than for England.
While I am not seeking on this occasion to question the overall level of public expenditure, I am seeking to influence Ministers to agree to a more equitable distribution that takes into account the genuine needs of the far south-west. It is only right that we in the far south-west do everything within our power to help ourselves, and this we will do. Indeed, the fact that we are helping ourselves will be evident from our tangible achievements in attracting foreign inward investment into Devon and Cornwall.
A total of £48 million of inward investment was gained last year, which resulted in the creation of 895 new jobs and the safeguarding of a further 550 existing jobs. The figures for the year beginning April 1995 are even more encouraging. Some £64 million in investment has been gained so far, leading to the creation of 1,237 new jobs and the safeguarding of 595 jobs. That is excellent news, and it is evidence that we are prepared to help ourselves. But just as the UK's industry, commerce and business in general seek a level playing field in their dealings with our European Union partners, so Devon and Cornwall require the same conditions in terms of the support we receive from the Government through public expenditure compared with the funds allocated to other parts of the United Kingdom.
I shall provide the House with two sets of figures to illustrate the existing unfairness. Last year, Devon and Cornwall received less than 1 per cent. of the national single regeneration budget, despite having almost 3 per cent. of the United Kingdom's unemployed people. Yorkshire and Humberside—with approximately the same percentage of unemployed people—received £19.2 million, or four times the allocation for Devon and Cornwall.
Secondly, taking Government aid and support as a whole, Devon and Cornwall last year received just £50 million in total, compared with £187 million for Wales and £530 million for Scotland. All these figures are taken from either the reports on the regional economy prepared by the Plymouth business school or the two independent reports prepared by Coopers and Lybrand. In addition, our regional daily newspaper, The Western Morning News, initiated in September a responsible and objective campaign for a better deal for the far south-west.
The Prime Minister and senior Ministers are aware of the findings of the independent reports, but there is increasing frustration and anger manifesting itself within the far south-west about the inability or unwillingness of the Government to respond to our genuine economic and social needs. When the Prime Minister received these reports 12 months ago, he said:
We shall certainly take account of your points in allocating resources".
We are at that time in the political calendar when the decisions determining public expenditure allocations are made. I just hope that due consideration will be given this year to meeting the requirements of Devon and Cornwall.

Mr. Harry Barnes: The speech of the hon. Member for South-East Cornwall (Mr. Hicks) was very different from that of the hon. Member for Bridlington (Mr. Townend). It was not just that the hon. Member for South-East Cornwall made a constituency speech, but that he referred to equitable distribution and how that related to the income tax provisions. Those points were entirely absent from the speech of the hon. Member for Bridlington, and I found myself at the opposite end of the political spectrum from every point made by the hon. Gentleman in his speech.
I wish that there was greater honesty from the Government in our Budget debates in the House. I realise that, in politics, that may be a wild wish, but we seem to have moved into a dangerous era of news management. We have had a Budget statement and debate in which some of the priorities have not been referred to at length. We have spent a lot of time debating the extra 50 per cent. on strong cider that will raise £5 million, and we have almost passed over what is happening with regard to VAT. Only one brief reference was made to that matter, although there are some proposals in the Budget which are aimed to raise £600 million by altering the accountancy schemes that operate in the collection of VAT. That is quite important. Will the scheme function? We are talking about a large amount of money.
News management does not merely take place when the Chancellor is addressing the television cameras in here. When we get to look at documents relevant to the Budget in the Vote Office, we find that some are press releases that are intended as news management. The Treasury argues that the average family will be about £450 a year better off and certain newspapers will pick up on that, but when one reads the qualifying remarks, one finds that it is talking about hoped-for economic growth, improvements in wages and other provisions and that that is what it is all about. Really, when one talks about the financial consequences of the Budget for an average family, if there is such a thing, one should consider the amount of money that will result from the Budget itself.
What was to be the Chancellor's final word on tax cuts? That was what everyone was concentrating on. We discover from the Red Book that, all told, income tax cuts account for about £3.7 billion. More than half that amount comes from the avenues that the hon. Member for South-East Cornwall mentioned and from alterations in the bands and allowances. That is interesting because, if

we had had none of that, we could have had a tax cut of 2p in the pound instead, which was the headline that many people were looking for.
At least the cut in the Budget shows that the Chancellor is giving some consideration to other factors that need to be taken into account, although the Budget is generally entirely inadequate and inappropriate for our needs and does not do anything for investment and growth, as the Opposition Front-Bench team has said.
Where does that £3.7 billion come from? As I said in an earlier intervention, £3.2 billion is from the reserves. I do not want to over-egg the argument because there are some technical reasons why it is as much as that. Higher figures are given for reserves for the year ahead and the year ahead of that. As one moves into the fresh year, one always takes a certain amount of money out of the reserve, but it is a fact that, at the time of the autumn statement in November 1992, the contingency reserves stood at £4 billion and they are now down to £2.5 billion. Those reserves are gradually being raided and we may be in a precarious position if some of the other items contained within the Red Book do not function properly.
That is a serious consideration and it seems to have been recognised in a number of contributions tonight. People realise that that is where the money is coming from. If all of it has not come from raiding the reserves, at least a part of it—the tax cuts—has, and I do not think that that is a healthy position for us to be in, especially as some of the rest is expected to come from tackling social security fraud. Hon. Members have already expressed doubts as to whether it will be tackled to the extent indicated. So there seems to be something economically dodgy about balancing the amounts.
On the equity considerations, the arguments expressed by the hon. Member for Gordon (Mr. Bruce), the Liberal Democrat spokesman, are important. We have been told that local authority expenditure on education will increase by something like 4.5 per cent., which is an increase in monetary terms. When we take into account inflation rates, it becomes an increase of about 1.25 per cent. The problem is that the latter figure is then tied in with the local government figure. We are told that local government expenditure will increase by 3.3 per cent.—just a little ahead of the inflation rate—so there will he no increased money for local government, although education has been granted that increase in expenditure. Cuts will therefore have to be made in other areas.
In one area—the fire brigade—equity runs in favour of Cornwall and not Derbyshire. The length of coastline is taken into account in the formula. Cornwall has a considerably longer coastline than Derbyshire, which is in the middle of the country and so has no coast at all. On grounds of equity, it seems that that arrangement should be altered.
It is little wonder that some money is being found for education, given the organisation, petitioning, lobbying and demonstrations with which parents, children and teachers have been involved. They have got some response. As always with this Government, however, when one gets a response in one area because of pressure, there have to be cuts in other areas—often areas of considerable need.
In Derbyshire, we have considerable problems in other areas, such as social service provision. I believe that tomorrow we will hear an important statement from the


Secretary of State for the Environment, which concerns district councils and will be of vast importance to Derbyshire. The problem is not only the size of the total bill and whether it is being raided in areas other than education, but the massive problem of the avenues of distribution, which is of considerable importance in Derbyshire.
North-east Derbyshire has one of the worst-funded district councils in England per head of population. It is unbelievable when one considers the nature of the area. I know how it works because I know something of the nature of the formula that operates. It is a fiddled formula and happens to hit us from all directions.
We need a more open and honest Government, who will explain what they are up to and are not merely trying to manoeuvre and manipulate people when they produce Budgets. Greater expenditure is justified in many areas, such as overseas development. The peace dividend in Northern Ireland should be spent in Northern Ireland. Those are the sort of things that we should be able to get our teeth into in these Budget debates.

Sir Andrew Bowden: There is no question but that the Chancellor presented a highly responsible Budget yesterday in the face of a propaganda campaign conducted by the official Opposition in which they claimed that everything that the Government have done and said in the past six months was designed purely to provide massive sums of money for huge—and irresponsible—tax cuts. Yet again, they have been shown to be totally wrong. I hope, however, that the Chancellor will be able to follow it up in the very near future with a significant cut in the interest rate.
On education, we must be careful to recall that we are talking about expenditure in the next financial year. There is every prospect that, in that financial year—beginning April 1996—the inflation rate will not be in excess of 2.5 per cent. That means that the increase in expenditure on and money made available for education will be nearly double the rate of inflation. Local authorities will certainly be able to maintain services in their areas and, in many cases, they will be able to improve them.
In East Sussex, which covers my area of Brighton, the settlement exposes the hypocrisy of the campaign organised by the controlling political parties on East Sussex county council, which have been going around Brighton and the county saying that, within the next three financial years, there will have to be massive cuts in expenditure on education. They were talking about £24 million pounds. Such a cut was never going to happen and the new announcement of the money that is to be available has shot the campaign to pieces.
Unfortunately, many parents were seriously worried and upset by what I can only describe as a scandalous campaign. We now need a community campaign in East Sussex and Brighton conducted by parents, school governors and teachers to ensure that that additional money is spent in the county's education budget. Without one, I suspect that the county will find excuses for not doing so.
I want now to deal with pensioner issues. I warmly welcome the proposals on long-term care. They will give many families more financial security and greater peace of mind. The director general of Age Concern England, Sally Greengross, stated:
Older people who are worried about paying for care will be delighted to hear the proposals in regard to the capital limits for residential and nursing home care.
That is indeed a major step forward, but it is just the first step.
The Government have said that they are preparing a consultative document on some of the problems of long-term care. I hope that that document will contain a range of proposals and possibilities so that there can be widespread consideration of the options. I hope that the document will include the possibility of people being able to buy equity in residential homes and/or to purchase a room in a residential home. That would help many people to preserve part, if not all, of the capital derived from the property that they owned and, when they died, the proceeds of selling their equity or room in the residential home could be passed down in the family.
There are two groups of pensioners that concern me deeply. There are those who do not claim income support when they could and those who have a few pounds a week above the income support level. Many of them will be worse off than people in receipt of income support. We have not yet found a way of giving the help and support that we should to those sections of retired people.
I am upset with one thing in the Budget—the Government's decision to cut the home energy efficiency scheme. Until the Budget, it was open to pensioners as a whole. Now, as I understand it, it will be limited to those on income support. That will create hardship and difficulties for those who do not claim income support when they could and for those who have only a few pounds a week above the level of income support. I submit to the Government Front Bench, with great respect, that that should be carefully reviewed. I hope that the decision will be reversed.
The payment of council tax on elderly relatives' annexes is another matter that has not been clarified by my right hon. and learned Friend the Chancellor and it needs to be clarified as quickly as possible. A compromise might be that, if a flat can be sold separately, it should be liable for council tax, but if it cannot be sold separately, it should not be liable for council tax.
The Budget is a harbinger of good things to come. The country can be grateful that we have a Chancellor with great courage and integrity.

Mr. Bill Etherington: When the Chancellor of the Exchequer made his statement yesterday, I took particular note of two sentences that he uttered early on. He said that he would seek
greater wealth and personal prosperity in which all can share
and that he would like to
give the weak and the less fortunate a helping hand."—[Official Report, 28 November 1995; Vol. 267, c. 1055–56.]
I am afraid that, given the use of those terms, the Chancellor's statement was disappointing and, indeed, a miserable failure. He is not going to do anything of the sort.
Another illuminating point, which the plethora of media publications since the Chancellor's statement do not seem to have picked up on, was that the Chancellor mentioned that tax receipts last year were lower than expected. I was alarmed to hear that he is looking for more privatisation of public services and more private investment in public services. I think that the Government were the first to use the term "double whammy". That is a classic example of a double whammy because it can be guaranteed that the pursuit of those philosophies will mean that the public will have to pay more for services, not less.
I was intrigued by the Chancellor's section on transport and I praise his nice attitude on the treatment of veteran vehicles. I think that they are veteran vehicles when they are over 25 years old, but they might be vintage. Certainly people treasure such vehicles. If people do not have a vehicle on the road, they should not have to pay tax.
I was somewhat beguiled by the idea that one can somehow improve things by increasing the tax on fuel for road vehicles and the road fund tax—presumably to try to cut emissions, although the only way to do that is to reduce the number of miles that are run. At the same time, however, we are led to believe that there will be a considerable reduction in public expenditure on transport, especially public transport. Albeit on a small scale, there will be an increase in the cost of motoring. Many people have no choice but to use a vehicle—and they are not all well off—yet there is no credible alternative in the way of a well-integrated public transport system with proper investment. I found that strange. It is a short-term policy.
I had the dubious pleasure this morning of listening to the Secretary of State for Social Security on Radio 4 after the 7 am news. For once, he sounded uncharacteristically unconvincing when speaking about the Government's policies on single parents. The reason that he sounded unconvincing might be to his credit because he was, after all, trying to defend the indefensible. We should take the attitude of the Secretary of State in conjunction with the proposals on housing benefit. We are talking about two of the most vulnerable sections of society, but where is the helping hand for them? They are not getting the helping hand; they are getting the reverse.
Do the Government really believe, after years and years of under-investment in housing and the rise of private landlords brought about by their deregulation policies, that people on housing benefit are in a position to negotiate with their landlords to get a reduction in rent simply because the Government think that it is possible? Does anyone really believe that that is a credible proposition? My experience suggests the opposite.
Recently, one of my constituents was being threatened by her landlord. If she was not to be out on the street, she had to give him £10 a week in addition to the housing benefit that he received directly. He would not give her a rent book or a receipt. That is the sort of behaviour that is bred by the Government's present housing policy. I will say a little more about that later.
We are also led to believe that the reduction in tax on savings to 20p in the pound is a wonderful thing. What about investment income? We are told that the Chancellor wants to reward hard-working people, but I do not think that he rewards them by taxing what they earn at a higher rate than he taxes investment income. A millionaire who

has invested £1 million can get away with paying tax at 20p in the pound, yet people on relatively moderate incomes must pay tax at a rate of 40p in the pound. That does not seem very satisfactory.
The Chancellor said that he believes that the Government can afford a 1p reduction in tax. That is notwithstanding the fact that the education budget has been cut consistently for many years. The council in my constituency is so strapped for cash that it has had to cut many education services and it is dreading—as I am—tomorrow's statement. It has also closed welfare rights agencies because of chronic underfunding through the Revenue support grant. I hope that, tomorrow, my local council, Sunderland city council, will be allocated the same amount of money as Westminster city council. That would solve all of my problems.
If the Chancellor can afford the 1p reduction in tax, which advantages those on high earnings disproportionately, why can he not afford to reduce value added tax on fuel? That would have given a helping hand to those in need, but there was nothing of that nature in the Budget.
I welcome the fact that tax on beer is not to be increased. I am fairly neutral on the subject of duty on whisky, but I am intrigued about why the duty on strong cider must be increased. If the tax increase is based on alcoholic content, why are spirits and wine—which are stronger than cider—not taxed in the same manner? I am still trying to work it out; it does not seem very logical.
On housing, I must declare an interest. I belong to the Durham Aged Mineworkers Homes Association, which comes under the auspices of the Charities Commission and is involved with the almshouse legislation. There will be 51,000 new social lettings this year, which is 9,000 fewer than the Government's lowest estimate. The cut from £1.5 billion to £1.1 billion will feed through into 18,000 fewer jobs next year—almost 10,000 fewer in the construction industry—and 30,000 fewer in the following year.
That will have a drastic effect in the northern region, where next year the number of homes that housing associations can start will fall from 3,097—which was the figure first promised—to only 1,670. That is a reduction of almost 50 per cent. Yet the Chancellor says that he is trying to do something about the housing sector. The only thing that he has done is introduce the spectre of more private landlords—and anyone who has studied history dreads that.
I believe that the Budget is based on economic failure. The hon. Member for Brighton, Kemptown (Sir A. Bowden) described it as a prudent Budget which was not quite what was expected. I agree that it is a prudent Budget in some respects, but it does not address any of the problems that I face in my constituency. It will not alter society for the better—indeed, I believe that it will have the opposite effect.
Much has been said about the Labour party's position on the 1p reduction in income tax and whether we will vote against it. I do not pretend to speak for the party; I just try to speak honestly for myself. One has to be prudent, but I must admit that I shall find it very difficult to resist voting against the 1p decrease because I think that it is regressive and to be deplored.

Mr. Matthew Carrington: At the outset, I declare my interests as they appear in the Register of Members' Interests—although I do not think that they will be very relevant to my speech tonight.
It is a great pleasure to support a very cautious and prudent Budget. The last few Budgets were necessary, but I cannot say that they were altogether pleasant. It is never pleasant to be forced to raise taxes but, coming out of a recession, it was necessary. For a party that is always strongly committed to reducing the tax burden, it was an unfortunate necessity.
The medicine has worked, however, and the economy is now doing extremely well. Our inflation rate is low—historically, it is at a very low level—and there are very few signs of inflationary pressures in the economy. Unemployment is decreasing, and it has been doing so consistently for a long time. Even the public sector borrowing requirement is decreasing fast—it decreased by £7 billion last year. The only problem is that it is not decreasing as fast as was projected originally and we are contemplating being one year behind the initial predictions.
Nevertheless, growth in the economy has been good. Last year, at 4 per cent., economic growth was too good as such a level is unsustainable in our economy. This year, the growth rate has reduced to a very healthy 2.75 per cent. That is still well above the economy's trend rate, which is some 2.25 per cent. With a rise expected next year, I think that we can be content that economic growth is very strong and not leading to inflation.
We are seeing signs of long-term, sustainable growth and that means that the supply side reforms for which the Government fought over 16 years are at last having an effect. All of that good news led my right hon. and learned Friend the Chancellor to produce a cautious Budget in which he did fundamentally very little. Although the economy is doing well, the recovery is still patchy.
The outlook is favourable for exporters, but two sectors of the domestic market—the retail sector and the housing market—are not doing well. I believe that it is correct to put money back into the pockets of individuals who can then spend it as they wish. That boosts retail sales directly and the building and housing markets indirectly. Tax cuts are the most effective way of putting money back into people's pockets and, as such, are entirely justified. They are a very sensible way of helping two sectors of the economy that have been in serious trouble.
However, I do not believe that tax cuts by themselves are enough. We now need substantial cuts in interest rates. Such cuts will not do very much for industry directly—after all, interest rates are at historically low levels and industrial investment decisions are unlikely to be influenced by further reductions in interest rates—but investment decisions are likely to be influenced by demand in the economy for the goods that industry can provide.
I do not believe that interest rate cuts will assist the housing market. House prices are now very low and houses are extremely affordable in income terms. Interest rate cuts will put more money back into people's pockets. They will have the same effect as tax cuts to—increase demand and, in turn, increase investment in industry. They will also increase people's willingness to spend money on their houses.
I should like base rates to be cut by 0.5 per cent. before Christmas, followed by another 0.5 per cent. cut fairly soon after that. I believe that a 1 per cent. cut in interest rates is entirely sustainable and I do not believe that it would adversely affect our exchange rate—particularly as German interest rates are now on a downward trend.
I must, however, mention one or two matters about which I am less happy. The first is the uniform business rate and its effect on London. My right hon. and learned Friend the Chancellor said in his Budget statement that, in parts of the country where rateable values are increasing, the uniform business rate is to be phased in more slowly than originally intended. In London, we suffer from the reverse problem. When the uniform business rate was introduced in 1988, property prices were extremely high. The revaluation that followed was done when property prices in London had come off the peak, and many businesses found that the notional reduction in their uniform business rate was phased in very slowly.
There should be a better balance between the phasing in of increases in parts of the country that are suffering them and the phasing in of decreases in London. Business in London, especially retail business, is in very poor shape at the moment and would benefit enormously from a reduction in rates.
My final argument is more technical. The Budget will lead inevitably to a very complex Finance Bill. There are technical changes in the tax structure that will be hard to put into a short and easily understood Finance Bill. As a veteran of many Finance Bills, and having sat on many Finance Bill Committees, I know the problems that confront the Committee when it has to examine highly technical clauses. There is neither the time to examine them in the detail needed nor, occasionally, the expertise in the Committee necessary to give them the scrutiny they deserve.
That problem should be tackled and there are several ways in which it might be done. The most obvious way, as several of us have suggested for some time, is to separate the technical taxes management aspects from the tax changes and put them into a separate Bill, which might be examined by a Committee that had the time to examine them thoroughly.
Alternatively, expert evidence might be taken on the highly technical clauses. That might be done by a Standing Committee with a dispensation of the House, or the Bill might be passed initially to the Treasury and Civil Service Select Committee to pre-vet those clauses, take evidence if required and produce a report for the Finance Bill Committee to consider.
One thing is certain. The technical clauses in the Finance Bill do not receive the scrutiny that they deserve. We end up returning to them year after year to change what we have passed in the previous years, which is highly unsatisfactory.
The Budget has done what is needed in the economy. I believe that it gives us that wonderful goal that we have searched for for years—sustainable, low-inflation growth. I hope, therefore, that it will lead to greater things in the Budget next year.

Mr. Denis MacShane: I joined the Labour party about a quarter of a century ago, and I


remember that the first great disappointment of my youthful membership was the introduction of a Budget by one Roy Jenkins, now a Member of another House, which led straight to Labour's defeat in 1970.
From a political point of view, the Budget presented yesterday by the Chancellor smacks very much of the same Treasury orthodoxy—cautious, candle-ends, steady-as-she-goes manipulation of the nation's finances, which, although the orthodox economists at the Treasury may smile about the fact that they have mastered their man, may lead to considerable political dismay in the Conservative party. We were aware of that yesterday, when the only cheer or smile came when the Chancellor announced that he would lift the vehicle tax on Bentleys and Bugattis. For the rest, it was a poor and dull reception indeed.
As we are discussing Mr. Jenkins and one of his successors, the right hon. and learned Member for Rushcliffe (Mr. Clarke), let me turn to another Conservative philosopher, who once said:
The whole business of the poor is to administer to the idleness, folly and luxury of the rich, and that of the rich, in return, is to find the best methods of increasing the burdens of the poor.
The Paymaster General, a learned graduate of Oxford university—I wish to apologise to him and to my hon. Friend the Member for Edinburgh, Central (Mr. Darling) for the fact that I must leave before the winding-up speeches—will recognise that quotation from Edmund Burke. Would that we had a Burke here today, to flay the creation of a two or even three-nation society, which the Budget will only exacerbate.
Twenty-one new taxes have been imposed since 1992, every one bearing mainly on the poorer members of the community. We are told that the Chancellor's decisions since 1992, reinforced by the Budget, will help to steer the British economy on to a more stable course, yet we are 18th in the world gross domestic product per capita league, having slipped from 13th since 1979.
Inflation here is higher than in the majority of European Union countries, including our main competitor partners. In its latest quarterly report, the Bank of England condemns the decrease in productivity improvements, especially the increase in unit wage costs, and we have the lowest investment witnessed for about 30 years.
That bears down especially hard on my constituents, because I have to see the Budget refracted through the eyes of the people of Rotherham, and not many live in £200,000 houses there. Not many have handsome investment incomes from savings who will benefit from the tax cuts that the Chancellor has made. On the other hand, 12.5 per cent. of the working population are unemployed—12,000 people altogether. One in five people under the age of 25 in Rotherham are out of work, and are now under a new onslaught as the money is taken from them to put into the pockets of the rich.
Is there any hope from the Budget for my constituents? It is a Budget that slashes a dagger at the arteries of investment, with £100 million taken away in grants to housing associations. That means that 35,000 fewer houses will be built this year as a result of those costs, and the construction workers and the small building firms of Rotherham will be left to face bankruptcy and despair.

There are cuts of £190 million in the roads programme—another blow for domestic construction and the civil engineering programme.
The business men of Rotherham and South Yorkshire wrote to the Chancellor last week. They begged him for any tax breaks in the Budget to be targeted at industry through increased capital allowances: no hope there. They welcome the private finance initiative, but find nothing in it for South Yorkshire, especially as those business men say that red tape defeats any efforts that they make to try to get the private finance initiative to work.
There is something very strange in the Red Book—a massive discrepancy, not only in the public sector borrowing requirement, but in other sectors, between what we were told last year and what actually happened. The Chancellor collected £1.1 billion less than he forecast last year in income tax, £700 million less in corporation tax than predicted last year and £1.5 billion less in value added tax than he predicted last year. There is an odd contradiction between the mood music that we constantly hear at DTI and Treasury Question Time about the economy getting stronger—indeed, the Prime Minister said in Prime Minister's questions on Tuesday that incomes were rising—and the fact that we are collecting less and less tax.
One reason may be the fact that tax avoidance remains one of the great growth industries in the British economy. As the hon. Member for Fulham (Mr. Carrington) suggested, tax legislation is the most complex legislation that the House passes. In fact, we have much the most complicated tax legislation in the world. Last year Rupert Murdoch made a profit of £960 million, but paid only £11 million in tax. What is the Chancellor's response to the fact that £15 billion to £17 billion has been lost in uncollected tax? His response is to fire 6,000 Inland Revenue employees who might be usefully employed gaining money for the state to help to balance the books.
Then we move on to the nightmare of self-assessment. Here I address my remarks to Front-Bench spokesmen of my own party. I do not know how many hon. Members have examined the nine new complicated forms that taxpayers will be expected to fill in under the proposed new self-assessment scheme, which will cover some 9 million taxpayers, but even at the height of the Soviet bureaucracy, the Soviet citizen was never plagued with a requirement to fill in such complicated forms. The Budget does not address the question of what we mean by and want from taxation; it contains neither innovation nor inspiration.
I welcomed the ideas presented by my hon. Friend the Member for Dunfermline, East (Mr. Brown), the shadow Chancellor, in the run-up to the Budget. He recommended a windfall tax—an appropriate suggestion, given the profits declared today by Yorkshire Water—and taking swathes of people at the bottom of the income scale out of the tax band with his 10p proposal. Here was the beginning of serious, innovative thought about our outdated tax regime. After all, the taxation of our people implies a fundamental relationship with Government.
The Chief Secretary to the Treasury made much of his conservatism. He has been a Fellow of All Souls for many years; I must add that in recent months he has helped to turn his party into a lost cause. He will recall the words of his old mentor Disraeli, who said of conservatism:
It offers no redress for the present, and makes no preparation for the future.


For my constituents in Rotherham, who live in the "two nations" Britain that the Chancellor and the Chief Secretary have created—people who cry out for redress of present ills and investment in future growth—the only answer is a change of Government.

Mr. Tim Smith: Notwithstanding what the hon. Member for Rotherham (Mr. MacShane) has said, I wish to defend the Inland Revenue's record on self-assessment. I believe that it will lead to simplification. It simply is not true to say that every taxpayer will have to fill in nine forms; the average taxpayer will have to fill in the main form and one schedule. I have just received the latest pack of self-assessment forms from the Inland Revenue. The Revenue has simplified the system considerably following consultation, and I think that it has done a pretty good job. In the long run taxpayers should save money, and we should be able to ensure that revenue is collected with fewer staff.
Listening to the speech of the hon. Member for Dunfermline, East (Mr. Brown), I wondered whether he had actually read the Red Book. I suspect that he had not. He complained a great deal about the level of investment, but if he had looked at page 30 he would have seen that manufacturing investment is forecast to increase by more than 10 per cent. this year and in 1996.
Similarly, I wonder whether the hon. Member for Rotherham took the trouble to read the Red Book. He, too, complained about the Government's record on investment. On the same page, the Red Book tells us that business investment is forecast to increase by 9 per cent. in 1996. I should have thought that that was a pretty good record.
The hon. Member for Dunfermline, East also complained about the present state of the labour market. If he had turned to page 39 of the Red Book, he would have discovered that the employer survey measure of the labour market shows an increase of 510,000 jobs since the trough at the end of 1992. The labour force survey shows an even higher figure of 650,000 over the same period. That is a pretty good record. It contrasts sharply with what happened during the recovery after the last recession, when employment did not stop falling for about four years following the trough of the recession. It illustrates the current flexibility in the labour market, which now responds much more quickly to changes in demand.
I do not know whether you saw the hon. Member for Oxford, East (Mr. Smith) on "Newsnight" last night, Madam Deputy Speaker. Jeremy Paxman rightly pressed him on why the Opposition refuse to make up their mind about whether they are in favour of reducing the standard rate of income tax by 1p in the pound. Labour Members are going to abstain: they are neither for nor against the proposal. I was interested to observe that the hon. Member for Sunderland, North (Mr. Etherington) clearly feels pretty uncomfortable about that. His feeling is understandable. The position of the Liberal Democrats is at least honest and straightforward: they will vote against it. What do Opposition Front Benchers think about it? Are they for or against it? How can they possibly abstain? It was no surprise to me that the hon. Member for Oxford, East looked so uncomfortable on the television last night.
This is a responsible, prudent and sensible Budget. I particularly welcome the fact that public spending as a proportion of gross domestic product will soon fall below 40 per cent. There is always an interesting table in the Red Book. This year, it appears on page 139, and it shows the record of public spending over the past 30 years. It shows that, in the recession of the middle 1970s, public spending peaked at about 47 per cent. of GDP. In the recession of the early 1980s, it peaked at around 45 per cent. and in the most recent recession it peaked at around 43 per cent. We have been moving in the right direction over the past 20 years, but we should aim, once we have it below 40 per cent. of GDP, to keep it there.
The Governor of Hong Kong, Chris Patten, was quite right—he has learnt a little from his time in the far east—to say that there is a correlation between the proportion of public spending as a proportion of national income and economic growth rates. Countries in the far east spend a lower proportion of their GDP and have higher growth rates. That is a good target. We are making good progress towards achieving it and we should stick with it.
What has led to a higher public sector borrowing requirement for the current year and for next year is not the Government's failure to control public spending, which has been kept under effective control, but rather, as the hon. Member for Rotherham said, that revenues have not come in at the anticipated level. In particular, VAT revenues are down by about £4 billion from the amount forecast, and next year's VAT forecast is lower than that for this year. That may be because of a lower level of consumer spending than was forecast. It is hard to know precisely what has contributed to that. It may not be so much VAT as the duties on alcohol and spirits, because a great deal of alcohol is now imported from France. That may have something to do with it, but revenues are down, and that is the explanation.
It is important that we ensure that public sector borrowing continues on a downward path, which is precisely what my right hon. and learned Friend the Chancellor proposes. It will soon be below the Maastricht level of 3 per cent. Significantly, I noticed that my right hon. Friend the Chief Secretary referred in his speech to capital expenditure, which is running at around £22.5 billion. That is quite a useful yardstick, too. The Government should not borrow more than the amount of capital spending in any particular year. It looks as though the two will coincide next year.
The Budget has also been criticised for not doing anything about investment. The Opposition came up with the tried but failed formula of increasing capital allowances. That did not work last time and it will not work if they ever have the chance to do that again, because it distorts capital spending decisions. What matters much more for investment is a stable economic climate, which is precisely what we have—low interest rates and low inflation.
The PFI has been criticised on the ground that there arc not enough schemes to illustrate precisely what can he achieved. I should like to mention two, both of which will benefit my constituency. The first is a massive extension to Wycombe General hospital, which will cost £32 million. The project was proposed by South Buckinghamshire NHS trust and is financed by the Royal Bank of Scotland. I understand that the developer will he Taylor Woodrow. That is a hard and fast example of a project that will benefit NHS patients in my constituency.
Another good example is the widening of the M40 from three to four lanes between Denham and High Wycombe. It is going ahead under a design, build, finance and operate contract. I hope very much that it will start in the middle of next year. It probably could not have been achieved without the PFI. Those two schemes will go ahead in the next 12 months.
Like my hon. Friends, I welcome the fact that education spending is to be increased. The key is to ensure that the £878 million that my right hon. Friend the Secretary of State for Education and Employment announced finds its way to the schools. I know that it is difficult to ring-fence this money, but we need some examples of how much each school would benefit if its budget were to be increased by 4.5 per cent.
I welcome the fact that the police are to get extra resources, and I understand that an announcement will be made tomorrow. I hope that Thames Valley police will get their share of the additional resources.
My right hon. and learned Friend the Chancellor made a welcome announcement about simpler legislation for Inland Revenue taxes. I echo what my hon. Friend the Member for Fulham (Mr. Carrington) said. It will provide the Procedure Committee with an opportunity to consider how we will deal with the additional legislation. My right hon. and learned Friend has proposed that all Inland Revenue taxes should be rewritten over a five-year period. I think that we should reconsider the idea of dividing up Finance Bills between the main taxation elements and the more technical elements.
The Budget is prudent and sensible and it will benefit consumers, taxpayers and the British economy alike.

Mr. Robert Ainsworth: The hon. Member for Beaconsfield (Mr. Smith) talked about the 500,000 jobs that have been created since the trough of the recession. He compared that with the last recession. Whose recession was that? That was also the Tory party's recession. If one picks the starting date and the finishing date carefully for statistics, one can prove almost anything.
Not long after the Government took office they created a solid bottom level of unemployment of at least 2 million people out of work. There is now a wasted generation. The real tragedy is youth unemployment and the Budget does absolutely nothing to deal with that problem. Nationally, 650,000 people under the age of 25 are out of work. In the west midlands region alone, 66,000 people are out of work, and in the metropolitan area the number is over 24,000. In some inner-city estates, it is unusual for a young male to have a job. That has been the case for over 10 years since the first Tory recession that the hon. Member for Beaconsfield mentioned. In my opinion, the Budget did very little that will affect that situation.
The Chancellor usually gives the Budget a name, such as the Budget for jobs, the Budget for Britain and the Budget for investment. He did not seem to give a name to the Budget this time. We thought he might call it the Budget for the Tory party's survival, but according to the reaction of Tory Back Benchers it was not that. It must be the no-name Budget. If the right hon. and learned

Gentleman will not give it a name himself, we will. The Queen's Speech was the "smoking out the Opposition Queen's Speech" and the best we can do for the Budget is probably The Sun offering of the "cold kipper" Budget.
The Chancellor is trying to say that it is a prudent Budget, but is it? He has slashed some capital spending, and that is hardly prudent because it only builds up problems for the future.

Mr. Kenneth Clarke: For information, we toyed with the idea of calling it a Budget for lasting prosperity, but the Opposition have given soundbites a bad name so I decided to drop the tradition.

Mr. Ainsworth: The Chancellor would not have got away with "the Budget for lasting prosperity". The headlines would have called him into even more ridicule had he tried to hang that title on his offering.
The Chancellor slashed capital spending. That is irresponsible because it puts off problems until tomorrow. That is exactly what the Government are doing. They plan to cut capital spending on the NHS by 26.5 per cent. over the next five years.
Over time, the party of prudence has incurred a huge increase in debt. Government spokesmen have compared the debts of some Labour-run cities with those of third-world countries and derided them by saying that Birmingham or Coventry, for example, owe more than such and such a place. But the Red Book shows that this country pays £22 billion a year in debt interest, which is more than we spend on defence or law and order and three times what we spend on transport. It is incredible that the Conservative party tries to pretend that it is a party of prudence when it has inflicted pain on people while running up such debts. It is clearly not the party of prudence, as the Chancellor would have us believe.
The increase in petrol prices coupled with the increase in vehicle excise duty are the two measures in the Budget that are causing the most anger in the country. I understand the need to discourage the excessive use of cars, but if petrol prices and vehicle excise duty are to be increased well above the rate of inflation, poor motorists will be punished. The Government have decided to settle traffic and tax problems by driving poor motorists off the road. That simply cannot justified. We should try, over time, to move the burden of taxation from excise duty on to petrol duty so that people pay tax for using their cars, not for having access to a car. In some rural and inner-city areas, people want a car to make themselves economically viable and get themselves into the job market, yet the costs of insurance and vehicle excise duty do not allow them to become car owners.
Conservative Members hold up our car industry as an example of some kind of revival, but all that we have had is inward investment. Nowadays, our car industry, apart from small companies, is completely and absolutely owned by foreign companies. We should not boast about that. I do not knock inward investment as our country needs it badly for the jobs that it brings. But the United Kingdom, Spain and Portugal have had the inward investment in the car industry. Is that the league that we want to put our country into? We boast about inward investment by Samsung in another industry, but the two countries that Samsung has invested in are the United Kingdom and Slovakia. Is that the league that we want to be in?
I agree that we need investment from wherever it comes but, as Conservative Members know, the problem that we have had for a long time is that our indigenous companies have not invested at the rate that they should. To see how that problem developed, we must look at the decline that has taken place throughout this Government's term, back through the previous Labour Government's term to the 1960s. People think that it is a natural decline and that the number of jobs provided by the car industry will inevitably fall. Jaguar, which is in my constituency, is a relative success but, over a period, it has failed to increase the number of jobs that it provides. In 1959, it employed about 5,000 people; it now employs 6,500. Over the same period, BMW has grown from 6,000 employees to 75,000 and it has now bought out the Rover group with another 30,000 employees.
A couple of years ago, Conservative Members derided the German economy and its way of doing business. They said that we would overtake Germany and become the leading economy in Europe, and that we could not have social contracts and works councils because they would ruin the economy. However, those are exactly what have applied in Germany over that 30-year period. That is exactly what applied in BMW over those 30 years. The BMW works council played a significant role in the development of job opportunities and job creation over a long period, and the result has been a tenfold growth in the number of jobs.
We ought to see some investment and some work that helps the car industry, but as in so many other areas what we get is pretence. A short time ago the Department of Trade and Industry issued a press release about the work that is being done along with the Society of Motor Manufacturers and Traders in trying to assist the small businesses that form the supply sector of the car industry. Everybody knows that the growth in jobs will be in that sector and not in the front-line companies and that there will be a need for quality research.
When we look behind the boast about the work that is being done with the SMMT, we see that about 200 companies will be involved and that 12 experts in quality have been taken to Japan for quality training so that they can help those 200 supplier companies. There are 4,000 supplier companies in the car industry and the problem is that our suppliers need a huge improvement in quality to compete on the world market. We are playing games and pretending to deal with those problems.
The country needs a Government who are actively involved in tackling these problems and not a Government who are happy to see a constant 2 million people unemployed—

Madam Deputy Speaker (Dame Janet Fookes): Order. [Interruption.] I am sorry, but the 10-minute rule is strictly enforced.

Mr. Nick Hawkins: Unlike the hon. Member for Coventry, North-East (Mr. Ainsworth) I entirely welcome the Budget. The problem with hon. Members such as him is that they often attempt to rewrite history. The hon. Gentleman spoke about problems in the car industry in the west midlands and about the growth of BMW, and he compared the number of employees. But he entirely forgot to mention all the trade union militancy

that was supported by so many Opposition Members when I lived and worked in the west midlands throughout the bad old days of the last Labour Government. Opposition Members should remember that it was trade union militancy and Labour apologists when that party was in government who completely wrecked the British car industry.
I want to speak about the reaction of ordinary people to my right hon. and learned Friend the Chancellor's excellent Budget, and I shall start by quoting a clothing and footwear assistant who told the Financial Times that the Chancellor had listened to the small people and thought that it was brilliant news. Those who are responsible for creating jobs in Britain are the people in the CBI. Its director general welcomed the fact that the Government had broadly stuck to the prudent economic line that the CBI recommended. He said the CBI was pleased that the Chancellor appeared to have limited tax cuts to reductions in spending and that he had resisted the temptation to go for excessive tax cuts. That is the kind of welcome that I like to hear.
On BBC 2 a Mr. Len Stone said:
My job will be secure. The Budget is good for industry, steady growth and people will buy more vans, especially the contract fleet.
The Financial Times stated that the financial markets had to be convinced that the needed combination of tough spending control and economic growth would be delivered, provided that the Chancellor convinced them that he would be able to cut interest rates. I hope that the Financial Times is right about that because that too will help my constituents.
I am particularly pleased that my right hon. and learned Friend listened to submissions by me and by many of my hon. Friends about help for the elderly and especially for those who require now, or may require, long-term care. My constituency has the highest proportion of pensioners of any constituency and I was particularly pleased not only at the measures in the Budget but at the way in which they have been received. In particular, Sally Greengross, director general of Age Concern, is quoted in The Daily Telegraph as saying:
Older people who are worried about paying for care will be delighted".
Jill Pitkeathley of the Carers National Association said:
We are delighted that this will relieve the worries of many families".
It is rare that I quote with approval anything said by a general secretary-elect of Unison, but even Mr. Rodney Bickerstaffe was heard to say on BBC Radio 4:
Anything that's going to help the elderly is going to be useful. It's a step in the right direction. So far as the poorest earners are concerned, there is something for them".
Even if Opposition Members do not recognise it, the country recognises that the Budget has been prudent, sensible and helpful.
I was especially pleased that my right hon. and learned Friend dealt with the difficulty that existed in relation to employee share ownership schemes. As one who, for a long time before coming to the House, supported employee share ownership, the sharing of companies' successes and the involvement of employees in those successes, I was delighted that Gill Nott, chief executive of Proshare, said about my right hon. and learned Friend's measures:
This is the best Budget for employee share ownership that we have seen in many years".


On public opinion, a Mr. Steve Spurling, a bank employee from Crawley, was quoted on BBC Radio 4 as saying about the Budget:
I'm personally pleased with the overall package introduced covering a range of areas. It means to me about £20 a month which is a tangible sum, something I can actually get my hands on".
I am especially concerned to ensure that there should be further help for the construction industry and I declare my interest as a consultant to the Building Employers Confederation. In that regard, there has been a broad welcome to the expansion of the private finance initiative. Sir John Banham, chairman of Tarmac, is quoted in the Independent as saying:
The Chancellor is on the right track and the measures he has put in place provide the best prospects for the UK building industry".
In relation to the housing market, the chief executive of the Royal Institute of Chartered Surveyors is quoted in the Independent as saying:
On the housing market, we are pleased that there has been no attempt at a quick fix. We have argued for some time that special help for housing will not work because the problem is not one of affordability but of confidence".
I agree with that and I am sure that my right hon. and learned Friend's Budget measures will bring back that confidence.
The chairman of Siebe, Mr. Barrie Stephens, is quoted in the Financial Times as saying:
I am very enthusiastic. The Government has looked at the economy dispassionately and sensibly and showed that they are good managers. It is a prudent and balanced Budget.
I especially welcome the fact that three steps have been taken towards a 20p basic rate in income tax, which helps both the lower-paid and savers. It is crucial that the Government's economic strategy should benefit the thrifty, especially thrifty pensioners. Income tax cuts that my right hon. and learned Friend has introduced will benefit 26 million people. Now one quarter of all taxpayers pay tax at only 20p.
I am delighted that my right hon. and learned Friend has cracked down on fraud and waste, and that he has helped to provide more provision for schools, for law and order and for health, the same three priorities that I and many of my right hon. and hon. Friends had urged on him.
By contrast, Labour's sums do not add up. The hon. Member for Dunfermline, East (Mr. Brown) had five questions from myself and other hon. Members. He failed to answer a single one in his speech. He cannot answer them because his sums do not add up. Labour cannot oppose the 24p basic rate because it knows that that rate is popular. Its policies are as bankrupt as it would seek to make the country if it were ever unfortunate enough to be in power.
I welcome the fact that my right hon. and learned Friend has not sought to hit the UK insurance industry. We wish to encourage more people to have proper insurance cover. He has rightly recognised the strength and importance of the UK insurance industry and not increased insurance premium tax. The problem with Opposition Front-Bench Members is that they all have backgrounds not in business but in lecturing and legal work. They do not understand the needs of the British

people or the British economy. Only my right hon. and learned Friend and his right hon. and hon. Friends have that ability and I strongly support his Budget.

Mr. Alistair Darling: I thought that the Chancellor had a legal background, as indeed do I. I was interested in what the hon. Member for Blackpool, South (Mr. Hawkins) said in praise of the Budget. If he is so confident about the Government's position, one wonders why he is, as I understand, on the lookout for a safer seat, and is joining many of his colleagues on the chicken run. Clearly he does not believe that the Chancellor or the Government have done enough to make it likely that the people of Blackpool, South will return him to the House at the next election.
It was the Conservatives, not us, who said that the Budget was designed to kick-start their political recovery. But the muted cheer when the Chancellor sat down, and the look of despair on the faces of Conservative Members, told us the real story. They knew that if that was the objective of the Budget, it had failed.
I was interested to read in the Independent on Saturday something attributed to the hon. Member for Bridlington (Mr. Townend). I am sorry that the hon. Gentleman is not in his place now, but I expect that he will return. Talking about the amount of money that the Chancellor should give away, he was quoted as saying:
At £10 billion I think that we would win the next election, at about £6 billion we could be in with a chance, but if it is only £2 billion or £3 billion we can forget it.
Right on cue, the hon. Member for Bridlington has walked back into the Chamber.
It is obvious what has happened today. Conservative Members have had to change their tune. They were led to believe that there would be huge tax hand-outs yesterday, so today they have had to make different speeches, in praise of alleged prudence on the part of the Chancellor.
The Chancellor has not revived the Conservatives' fortunes, because he cannot. In particular, he has failed to revive the country's long-term economic prospects. I was amused, as I suspect others were, when the right hon. and learned Gentleman said that he had half thought of entitling his Budget, "A Budget for lasting prosperity"—but of course, we have all come to admire his sense of humour.
After 17 relaunches, the Tory party is still searching for a solution, and the Budget, like the Queen's Speech, has proved something of a damp squib. As my hon. Friend the Member for Coventry, North-East (Mr. Ainsworth) said, the Queen's Speech was supposed to smoke us out, but instead people saw the bankruptcy of the Conservative party's policies and position.
The Budget is no different. It was supposed to be designed for political purposes and to breathe life into the Conservative party, but it failed to do so. As my hon. Friend the Member for Dunfermline, East (Mr. Brown) said, the Conservatives are prisoners of their own political and economic failure. After 16 years they are running out of ideas and have no sense of direction.
The flagship of the Budget was supposed to be a dramatic cut in income tax, but when it came it was just one penny. The best that the Chief Secretary to the Treasury could say was that it was "plausible". That is


not much in the way of praise. Indeed, the right hon. Gentleman's contribution was notable for the fact that he said little about the Budget, contenting himself with making several allegations about our position, which he then had to withdraw.
There we have it—a cut of only one penny, after everything that the Government have said. Seven pence up since 1992, one penny down in 1995. And that comes from a Government who have given us 21 different tax rises since 1992. I notice that over the past three years there has been no word about the money that was taken away in tax belonging to the taxpayers. Today, apparently, only the one penny belongs to the taxpayers, not the six pence that has also been taken from them since 1992.
At the general election the Government promised to reduce taxes year on year. And they promised a recovery that would start the day after the election. No wonder people do not trust the Government, or believe a word that they say. Even after the Budget an average family is about £670 worse off than it was at the last election. What the Government give with one hand they take away with the other, and people know that. They know income tax is down by one penny, and they will welcome that partial relief, but they also know about the increased charges, the increased rail fares caused by the privatisation of British Rail and, as my hon. Friend the Member for Coventry, South-East (Mr. Cunningham) said, increased council tax.

Mr. John Townend: The hon. Gentleman talks about an increase in taxes "equivalent" to 7p in the pound, then compares it with a reduction in the standard rate of 1p in the pound. To be consistent, if he is talking about equivalent tax reductions he should compare them with equivalent tax increases. The figures are not 7p and 1p, but 7p and 2½p.

Mr. Darling: I am surprised at the hon. Gentleman. I thought that he was going to help clarify what he was reported as saying in the Independent on Saturday. I will not repeat it, because he obviously knows what he said to Colin Brown, the paper's chief political correspondent.
Before the Budget, and indeed in the House on many occasions, the hon. Member for Bridlington has made the point that he has felt let down by the Government putting up taxes. The 7p figure did not originate with us. We do not claim authorship of it. It came from the Chancellor of the Exchequer himself. The public know that since the election taxes have risen by the equivalent of 7p in the pound, so the Conservatives cannot really expect gratitude for giving back 1p in the pound in the meantime. [Interruption.]
I want to reply to the many points that were made in the short time available. One point, in respect of—[Interruption.]

Madam Deputy Speaker: Order. There are too many seated interventions.

Mr. Tim Smith: rose—

Mr. Darling: I think that the hon. Gentleman was one of those shouting from a sedentary position. I may give way to him later if I have time, but not at the moment.
I want to deal with a point made by the right hon. Member for South Norfolk (Mr. MacGregor). He was good enough to write to me to say that he could not stay for the entire debate. No doubt he will read what is said. He made the point, as have other Conservative Members, that a number of my Back-Bench colleagues have said things that might be interpreted as a call for further expenditure. He did that having just asked for further expenditure on the roads programme in East Anglia.
The right hon. Member for South Norfolk made that statement quite properly as the Member for an East Anglian constituency. Government Members and the chairman of the Conservative party should think long and hard about the implications of what they are doing. Are they saying that Back-Bench constituency Members cannot make constituency points in support of their constituents' position, advocating certain courses of action, such as the hon. Member for Brighton, Kemptown (Sir A. Bowden), who said that he wanted to do something with VAT on energy efficiency, like the hon. Member for Bridlington, who suggested an increase in VAT—

Mr. Townend: indicated dissent.

Mr. Darling: Yes he did; earlier this evening he suggested an increase of 1 per cent.
Such points are legitimately made by Back-Bench Members of Parliament and it really is disingenuous for the Conservative party to interpret them as being the position that a party might take at a general election, any more than Labour Members would be correct to say that just because one Tory Back-Bencher said something, whether on the Clive Anderson show or in this place, somehow the whole weight of the party is thrown behind it. The right hon. Member for South Norfolk, who is an intelligent man, might want to reflect on the implications of what he said.

Sir Andrew Bowden: Will the hon. Gentleman give way?

Mr. Darling: Yes, but it will have to be the last intervention because I do not want to spoil the Minister's winding-up speech.

Sir Andrew Bowden: Does the hon. Gentleman agree that there is a difference between an individual Back Bencher presenting a case that might have a constituency connotation or a special interest, and an impression given by an Opposition Front-Bench spokesman—without saying so but implying it quite clearly so that the public assume it—that if his party wins, it will spend more money in a particular area?

Mr. Darling: The right hon. Member for Peterborough (Dr. Mawhinney), the Conservative party chairman, has been attributing commitments to the Labour party by listening to Back Benchers. I am sure that the Government would not claim that what the hon. Gentleman said this evening, or indeed what the right hon. Member for South Norfolk said, was Government policy. Unless we expect Members of Parliament no longer to advocate the interests of their constituents in this place—where after all they ought to do it—we should think long and hard about the consequences of the comments of the right hon. Member for South Norfolk.
As my hon. Friends have said, the Government's Budget was no surprise. The Chancellor's room for manoeuvre was restricted. Public borrowing is higher than forecast—this year it is £29 billion and forecast to move upwards in the next three years. There is slower growth and the Chancellor tells us that he thinks that there will be growth of some 3 per cent. in future. No wonder he is straining credibility.
Of course a great deal is perilled on this high growth. If next year the Chancellor is going to be able to mount a giveaway Budget—there will be pressure from Conservative Members on him to do so—that promised growth will have to be delivered. However, the record does not suggest that he is likely to be successful. The Chancellor wants us to believe that next year will somehow be different from past years. We have had higher inflation than the Chancellor predicted and the current account deficit is worse this year than he predicted.
Investment—the future for long-term sustainable economic growth—has of course been cut. There are some things that we do welcome, such as the move to simplify tax, but we think that the Government should do more to prevent tax evasion and to close tax loopholes.
I welcome the Chancellor's move to clarify and improve the position with regard to share ownership. We believe that employees should be encouraged to have a stake in their firm and that such a stake should be open to everyone from the boardroom to the shop floor. However, shares and options should be given as a reward for success. They should not be granted in anticipation of success that may never come, and they should encourage saving.
We shall have to see what provisions there are in the Finance Bill, but it would be wrong for us not to welcome the fact that the Government have moved in a direction that we have advocated for much of the last 12 months. I am only sorry that the Government have done nothing about the abuses that are happening in the boardrooms of the privatised utilities.
We welcome the promotion of saving and what the Chancellor had to say on that. I listened to the Chancellor yesterday and I thought that I was listening to my hon. Friend the Member for Dunfermline, East, who made exactly the same point some weeks ago. We wish to build on the PEPs experience and to create specific instruments that will encourage people to save in the medium and the long term.
We welcome what the Chancellor has done with regard to the excise duty on Scotch whisky. It is, however, to investment and the private finance initiative that I want to return since the Government have set so much store by it. The fact is that the PFI has never taken off. We have always supported the principle of the PFI. The deputy leader of the Labour party, my right hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott), was the first to float that idea before the last general election. He was denounced at the time, and then the Government promptly accepted much of what he had said.
There are two problems with the PFI. First, it has been strangled by bureaucracy and by red tape. Every capital project has been channelled through the system, which has clogged it up. Secondly, the Government have never set a list of priorities. In 1992, the Government published a list that included 78 projects, ranging from the west coast main line upgrading to the car park at Eastbourne hospital. The private sector had no idea where the Government's priorities lay.
Two things are striking about the Government press release that was issued yesterday. First, the Government have accepted that there must be some degree of prioritisation and said that they will publish an illustrative list. In fact, 1,400 projects have appeared today with an A or a B against them. The Government have to do more to indicate their priorities as between projects that have a major strategic interest and those that have a lesser interest in relation to a national strategy. The private sector has told us and anyone who is prepared to listen that the great difficulty is that it has no idea which projects the Government are likely to favour and which they are not.
The Government's attachment to right-wing dogma has meant that they have privatised the decision-making process. It is for the Government to give a lead and then invite the private sector to contribute. If they did that, there would be a better chance of seeing more projects get off the ground and under way. Once we saw some projects get off the ground, more would follow.
The second interesting thing about the Government's press release yesterday is that they promised a further £14 billion of investment by 1998–99. Of course, that includes the £5 billion promised last year. Little of that £5 billion has found its way into agreed projects which have started. We are entitled to take with a degree of scepticism the Government's commitment that the PFI can take the place of public investment. It is planned that Government investment in the public sector will fall by almost 18 per cent. between this year and 1999. That is on top of a cut of 7.2 per cent. in real terms in the past three years.
Government direct investment in the national health service will be cut in real terms by 27 per cent. in three years. Given the lack of progress in the PFI, people are entitled to ask how the Government expect it to take the place of public investment. When the PFI was originally launched, it was suggested that it would represent additional investment. The clear lesson of what has happened in the past few years is that the PFI is not additional investment but a substitute for public sector investment. It is not even that, because little of it is getting off the ground. If the Government prioritised the projects that they would like to see get off the ground and broke down some of the bureaucracy and red tape that is created, some real progress would be made.
Indeed, anyone wanting a clue as to what is going wrong need look no further than a press release put out by the Secretary of State for Education and Employment which said that "too few people" knew how to exploit the initiative to its full advantage. That was why, the release continued, the right hon. Lady's Department had "established a hotline" on the matter. So, the people


who brought you the coneline now bring you a new hotline to try to get the project off the ground. The Government really need to do more.
The projects are a matter of choice. In health, the Government are spending £1 billion a year on bureaucrats, and not on front-line care. Why does a hospital need a press officer? In education, the Government have chosen to double the assisted places scheme instead of using the money to cap class sizes below 30.
The hon. Member for Gordon (Mr. Bruce) is not in his place, but it would be wrong of me not to reply to his point about his party's position on the Government's reduction in income tax and how that relates to education. I take with a great big pinch of salt what the Liberal Democrats have to say on this, as in all other matters. They are the people who said that the top tax rate should be 60p, and then said a week later that it should be 50p. They said that a penny should be put on tax for education, but then said that they would consult about it. They later said that they would make that tax increase if it was necessary.
When he was challenged today, the hon. Member for Gordon did not know what his party would do at the next election. I would say to my hon. Friend the Member for Sunderland, North (Mr. Etherington)—who also raised the matter—that even if the Liberal Democrats' position were carried, there is no chance that one penny of that money would find its way back into the education Budget. That option does not lie with the Opposition, only with the Government. We believe that it is quite wrong to impose further taxation on people who are already paying more than ever before by way of tax. The people who would benefit from the education system are suffering now.
The Government's position simply does not add up. They have done nothing about tackling long-term unemployment. In one in five non-pensioner households, there is no work whatsoever, and the Government are doing nothing about that. We have made a firm proposal to implement a windfall tax, which we believe would have a major impact on getting people back to work. The Government's proposals make no economic sense and no social sense. The Budget deserves to be rejected for that reason, and for every other reason advanced tonight.

The Paymaster General (Mr. David Heathcoat-Amory): In his speech yesterday, my right hon. and learned Friend the Chancellor set out a Budget for this country's earners and savers, and a Budget that will spend more money on priority services while cutting the cost of government. It is quite clear from today's debate that that is strongly supported by my hon. Friends. It is clear too that the Opposition are in a muddle.
The Opposition are anxious to pose as the taxpayer's friend, and they have announced that they will not oppose the tax cuts—that was the one question answered by the hon. Member for Dunfermline, East (Mr. Brown)—but they will not support them either. They will abstain—at least, most of them will do so. The hon. Member for Sunderland, North (Mr. Etherington), who is in his place, hinted that he would

vote against the tax cuts. Old Labour has some principles left, but new Labour will heroically abstain on the central issues of the Budget. Very new Labour may come round to support the tax cuts; the lurch to the right in the Labour party is not over yet.
The confusion and muddle on the Opposition Benches has a simple cause. When a party such as Labour abandons all its traditions, dumps its baggage and disowns its past beliefs and becomes motivated solely by the desire for office, nothing keeps it together. That is why the Opposition's response to the Budget has been so shallow and opportunistic, and why the shadow Chancellor seemed genuinely incapable of answering simple points put to him by my hon. Friends. What was his inflation target? He did not have one. What was the cost of his 10p lower rate tax proposals? He did not know. Would he support our 20p savings rate? He would not say. Would he abolish the insurance premium tax, which he has opposed? He had no idea. Yet Labour claims to be the party of government in waiting.
The contrast between that policy vacuum and the Budget laid out by my right hon. and learned Friend the Chancellor of the Exchequer could not be clearer. We have balanced our tax-cutting proposals with similar cuts in public expenditure, while preserving areas such as health and education.
I agree with my hon. Friend the Member for Brighton, Kemptown (Sir A. Bowden) that the extra money for education must go through to the classroom. He clearly has a similar local education authority to mine and that of my right hon. Friend the Member for Bridgwater (Mr. King)—too much of the money sticks to the local authority and never gets to the classroom.
We have increased priority expenditure by a further drive on waste and on fraud in social security expenditure and by delivering year-on-year cuts in the expenditure of Whitehall Departments. That has been driven through by my right hon. Friend the Chief Secretary to the Treasury and I am pleased that the policy had the strong support of my hon. Friend the Member for Bridlington (Mr. Townend) and others.
The civil service is now more than 30 per cent. smaller than it was in 1979. In the next three years, the cost will fall by a further £2 billion in real terms. As the Government are the largest service industry in the country, it is right on economic grounds alone that they should also be the most efficient. The relentless drive for efficiency over that part of the economy that the Government control is without doubt one reason why the performance of the British economy generally has been so much better in recent years than in the 1970s.
Even employment, which cropped up again and again in the debate, is showing signs of a successful recovery. Unemployment is lower than in Germany, France or Italy, and we have the highest proportion of people in work of any major European economy. Of course, there are regional variations and I listened carefully to what my hon. Friend the Member for South-East Cornwall (Mr. Hicks) said, even though the bulk of his remarks about the distribution of the funding formula were perhaps more accurately directed at my right hon.


Friend the Secretary of State for the Environment. He will be listening and has already listened to representations from the west country and other regions.
There were persistent calls for more Government investment—an echo that we heard in the past from the Opposition. They still believe that unemployment can be solved and investment increased simply by spending more Government money. If they should have learnt anything from the sad experiences of the 1970s, it is that a thriving economy is created not by the Government but by a successful private sector.
I shall take one example—the small companies rate of corporation tax was 42p in the pound when Labour left office in 1979, but we have reduced it to 24p in the pound. We have nearly halved the tax rate on those successful companies. That does far more for growth, investment and employment than any of the spending schemes dreamt up on the Opposition Benches.
The hon. Member for Coventry, South-East (Mr. Cunningham) asked what the Government had done for industry, but I say that industry and business generally now have a choice. They will get something from Labour and, indeed, from the Liberal Democrats—the social chapter of the treaty of Rome. The Leader of the Opposition did not seem to understand it when he spoke to the Confederation of British Industry recently, but the fact is that the provisions of the social chapter—its red tape and regulations—could be imposed on us by majority voting. It is no good him saying that he would pick and choose and take only those bits that he liked. That is what Labour offers—the social chapter, and imposed on us if necessary. The choice is between that and what we offer.
We have delivered in this Budget alone a further income tax cut, a cut to the small companies rate of corporation tax, further relief from capital gains tax for those who are retiring, lower inheritance tax and a cut in national insurance contributions—funded from a tax on landfill waste—which alone will be worth £500 million off that tax on employment. We have also given more generous transitional relief for business rates. That is how to promote growth, investment and jobs.
As regards taxation, there was not only muddle on the Labour Front Bench but a persistently expressed resentment on the Labour Back Benches that there should be tax cuts at all in the Budget. That was true not only of the Labour party but of the Liberals. It was revealing yesterday that the right hon. Member for Yeovil (Mr. Ashdown) described income tax cuts as a bribe. Conservative Members do not think that it is a bribe when people keep more of what they earn and save; it is their money. It shows how illiberal and statist the Liberals have become that they think that money belongs to the Government to be dished out as they like.
We are on target for our 20p basic rate and the Budget achieves that for savers. They will pay tax at a basic rate of 20p from April next year. We have also achieved our target for the quarter of all taxpayers who will now pay tax on their income at only 20p in the lower rate band. The penny off the basic rate cuts marginal rates for 18 million people, who have no hope of anything similar from the Opposition.
What did we get from the Opposition'? As my hon. Friend the Member for Blackpool, South (Mr. Hawkins) said, Labour's tax and spending plans do not add up. Right through this debate and the debate on the Queen's Speech, we had calls for more public expenditure. Earlier today, in the social security statement, the hon. Member for Islington, South and Finsbury (Mr. Smith), who leads for the Opposition, spent £1 billion in a few minutes in responding to my right hon. Friend the Secretary of State for Social Security.
The socialist wing of the Labour party clearly believes—and always has believed—in high and rising public expenditure. That is an article of faith. I do not agree with it, but I have some respect for views constantly held and consistently argued. I have no respect for the new Labour pretence that it can all be done without putting up taxes.
I read the shadow Budget of the hon. Member for Dunfermline, East. There was nothing in it about levels of borrowing, expenditure or interest rates and the only thing about taxation was the new 10p in the pound rate for the lower band. It was, of course, not costed—there was nothing so awkward as having to find the money for it.

Mr. Darling: Will the Minister give way?

Mr. Heathcoat-Amory: If the hon. Gentleman will forgive me, I still have some points to answer and only three minutes in which to do so.
As a preface to the shadow Budget, the hon. Member for Dunfermline, East said:
I want to see openness and honesty in tax.
He could have started by applying those precepts to his own Budget.
The hon. Member for Gordon (Mr. Bruce) is not in his place. He gave notice that he would not be and I will have to send him a message through the Official Report that he is not exempt from a similar criticism. His shadow Budget, his so-called costed programme, for nearly £6 billion of extra expenditure was going to be paid for by "tax changes"—they are called not tax increases but tax changes—of £1.1 billion. Another item was "tax reform" of £990 million. There are no details about the reforms or the tax changes. If one reads "tax increases" for "tax reforms", one begins to realise that the words "openness" and "honesty" take on bizarre meanings in the mouths of Opposition spokesmen.
The central fact is that government is not like that: we are about having to take hard decisions and make difficult choices. We have not flinched from that and the economic indicators are now pointing in the right direction. Inflation is low, growth is up, unemployment is down, borrowing is declining, investment is increasing and taxes have been cut. That may be bad news for the Labour party, but it is certainly very good news for Britain—and there is more to come. As we move towards the introduction of the Finance Bill later in the year, we shall, we hope, find out more about the Opposition's non-proposals.

It being Ten o'clock, the debate stood adjourned.

Debate to be resumed tomorrow.

PETITION

Solicitors (Unprofessional Conduct)

10 pm

Sir Andrew Bowden: With your permission, Madam Deputy Speaker, I beg leave to present a petition, signed by more than 3,700 people, requesting that an independent regulator consider complaints against solicitors for unprofessional conduct. The petition states:
That until the Law Society and the Solicitors Complaints Bureau are made accountable to an Independent Regulator members of the public remain open to abuse from the legal profession. A long overdue requested Public Inquiry into the handling by the Law Society and the Solicitors Complaints Bureau of Mary Blakeman's long standing complaints regarding a solicitor's unethical, unprofessional conduct will bring justification to bear on the issue. Wherefore your Petitioners pray that your honourable House will give urgent consideration to this Petition to make effective its desire because in all areas JUSTICE A 'MUST' IS!

To lie upon the Table.

Libya and Iraq (Sanctions)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Heathcoat-Amory.]

Mr. Tam Dalyell: This is a debate about sanctions against two countries with which the United Kingdom has, historically, enjoyed excellent relations. Many of the decision makers in Libya and Iraq were educated in this country. As we debate the issue of sanctions, we also debate our country's long-term relations with two very important areas of the Arab world.
Anyone who visits Iraq must be dismayed that a once sophisticated society should be reduced to grinding poverty in many areas. Every recent visitor to that country—including the right hon. Members for Old Bexley and Sidcup (Sir E. Heath) and for Tweeddale, Ettrick and Lauderdale (Sir D. Steel), the former leader of the Liberal party, and many others—is appalled, as I was, by the terrible conditions in the children's hospital in Baghdad or the conditions in another hospital at Um-Kasr on the Kuwaiti border. Infants, who cannot conceivably be responsible for any of the horrors of the past 10 years, expired in my presence—and I do not exaggerate.
The most recent visitor to Iraq with whom I have been in contact is Riad El-Taher, an Iraqi-born British subject. He is concerned about the British Government's entrenched support for United Nations Security Council resolution 986. He writes:
Can I bring to your attention … the long term erosion of trust and historical ties taking root among the upcoming generation".
I sensed that during my visit.
The majority of UK educated Iraqis are reaching retirement age and are being replaced by a generation fed on suspicion of the West and particularly Britain's continued support of sanctions.
I mentioned that issue at Question Time, and I say as gently as I can, and I hope without giving offence, that I wonder whether the Minister, his colleagues and his civil service advisers really realise the extent to which a generation is growing up about to hate the west—people who have been trading partners and friends. It is tragic.
UNSCR 986 is heavily biased, being intrusive, divisive and certainly not addressing the chronic humanitarian shortages of food and medicine. These shortages are felt most strongly among the young generation … and the salaried sector in general. The financial benefit, if Iraq manages to sell the allocated oil, after deduction of the heavy burden of reparations, administration and allocation to the Northern Governorate under UN supervision, will be in the region of 7–8 US$ per person per month (outside Iraq).
That places seriously in question the assertions that it is simply up to Saddam Hussein to change policy, and all will be well. I fear that the detail of what is happening shows that that certainly would not be the outcome.
One is forced to take the view that UNSCR 986 was not intended to provide humanitarian aid to the Iraqi people, in view of five factors. Both the UK and USA hold substantial Iraqi frozen assets, which could be controlled effectively for the sole purchases of badly needed food and medicine from their respective countries and for immediate release. Even if Iraq were prepared to agree to UNSCR 986, there are no guarantees that funds would be available from the sale of oil or for the purchase of humanitarian requirements, due to the complexity of


the contractual demands. The reparations burden should be set aside at this stage, as Iraq can tackle that issue when sanctions are lifted. The rest of the argument is well known to the Foreign Office.
I simply say to the Minister, and through him to the Foreign Secretary, that the right hon. and learned Gentleman the Foreign Secretary should go to some of his constituents, the Church and Nation Committee of the Church of Scotland—he represents many of the leading members of the Church of Scotland in the Pentlands constituency of Edinburgh—and speak to them about their detailed knowledge and their knowledge of the humanitarian position.
Hansard records that, on 21 December 1988, I raised the subject of Libyan sanctions in the House. From new year's eve 1988, for reasons that I have outlined in seven previous Adjournment debates, I have had a deep interest in the subject.
Tonight, I make two requests. First, is it not time, after seven years, that the crucial timing device is produced? Let independent experts examine the timing device, because so far only photographs have been produced, and the head of the firm of manufacturers, Edwin Bollier, and his engineer, Ulrich Lumpart, have not even been allowed to see it.
I ask specific questions of which I gave notice to the Lord Advocate and the Crown Office in Edinburgh, which they undertook to pass on to the Minister. Is the Minister aware that Thomas Thurman, the Federal Bureau of Investigation officer who claims to have identified the timing device, is under investigation by the US Justice Department regarding allegations by a fellow FBI officer, Frederick Whitehurst, that he fabricated evidence and committed perjury in a murder trial in the USA? That was outlined in The Scotsman by a remarkable reporter, Stephen Breen. I have cross-checked with other sources, however.
Does the Thurman/White House situation lead Her Majesty's Government at least to question the credibility of Thurman, and the credibility of the Crown's identification of the timing device? Should Thurman be found guilty of perjury, would the Crown reassess the evidence and case against the two Libyans, given that the timing device is the key evidence linking the Libyans and the bombing?
The whole story of so-called evidence from Mary's House in Valletta, and the 18 different identifications of Tony Gouchie, would be very flimsy in any court of law. Where, we ask, is this timer? Has it ever been out of the United Kingdom? Who found it? When was it found, and where? The imagination boggles. A timer supposedly in pristine condition was out in a Scottish winter for 15 months or so. I do not believe that the timer on the Pan Am clipper "Maid of the Seas" is in the possession of the authorities; I believe that they have a photograph of a rather different timer.
I have done my best in regard to my next point, and I also understand the Prime Minister's reasons. Before my question to him about the last issue that I shall raise is dealt with, let me issue a request that serious consideration, at least, be given to the Libyan suggestion of a trial in The Hague, under Scottish rules of evidence

and under a Scottish judge. I feel that, after seven years, there is a strong argument for considering that as a serious possibility.
I am pleased to see that my right hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) is present, because he has had a deep interest in Malta ever since we worked together when he led the Labour European delegation to the European Parliament. He had a good deal to do with Malta then. I shall not speak for my right hon. Friend, however; I shall speak for myself.
I do not believe that there ever was a Malta connection. We had hoped, yet again—along with the relatives, who have been steadfast and will not go away—to see the Prime Minister before these questions were asked. I do not believe in yah-boo Prime Minister's Question Time. The Prime Minister wrote to me:
I have considered carefully whether I might meet Jim Swire, Pamela Dix and Martin Cadman before your question. Unfortunately I fear that my diary is such that there will be no possibility before then.
The offer has been made, but I hope that the Government will look carefully at the possibility of a trial in The Hague to bring the matter to a head.
I suspect that the reason why the Government do not want to go to The Hague is quite simple: they realise only too clearly that a Scottish judge, under Scottish rules of evidence, might well humiliate them by saying at an early stage that there was no case to answer.
It really is unrealistic to suggest that the Libyan Government ought to send the two to Britain. If the boot were on the other foot, would Her Britannic Majesty's Government extradite two men whom her country believed to be innocent to Libya, with which Britain has no extradition treaty? I doubt whether any British Government or the House would do any such thing. After seven years, the time has come to take some action, at least to try The Hague, because, if not, the suspicion exists that the Governments of the United States and Britain do not want the truth about Lockerbie.

The Minister of State, Foreign and Commonwealth Office (Mr. Jeremy Hanley): I should like to begin with a few general points on the use of sanctions. The decision to impose sanctions on a country cannot be taken lightly. Under the UN charter, if a country threatens international peace and security, as both Iraq and Libya have done, the Security Council is empowered under chapter 7 of its charter to take action. On that point, I should like to clarify why there are sanctions on Iraq and Libya and not on Nigeria. The human rights abuses in Nigeria, while abhorrent, are an internal situation and therefore cannot be classified under this chapter.
As much as possible, sanctions are tailored to ensure that they are not just punitive but counter the wrong that has been committed. The aim of sanctions is to counter threats to peace and security, and to try to get the penalised country back into line with the international community. That approach is reflected in our policy towards Libya and Iraq, in which sanctions play a central part.
Before I respond to the specific points raised by the hon. Member for Linlithgow (Mr. Dalyell), I shall recall the reasons behind the sanctions against Libya and Iraq—first, Libya.
Sanctions were imposed by the Security Council in March 1992 and in November 1993 because Libya had failed to comply with the requests of the United Kingdom, United States and French Governments, following the bombing of Pan Am flight 103 over Lockerbie on 21 December 1988 and a Union des Transports Aerien aircraft over Niger in September 1989. It is worth reflecting just for a moment on the scale of those outrages. The first involved the death of 270 innocent persons; the second, 171—a total of 441 victims.
After the biggest criminal investigation in British history, the Dumfries and Galloway constabulary had by November 1991 uncovered sufficient evidence to enable charges to be brought against two Libyan nationals in connection with the Lockerbie bombing. The UK and the US called on the Libyan Government to surrender the accused for trial, to tell what they knew of the crime, and to pay appropriate compensation.
The Libyan Government failed to do any of those things. Through UN Security Council resolution 731, in January 1992, the international community endorsed the UK and US calls on Libya in connection with Lockerbie, and the French calls regarding UTA, but still Libya failed to comply. The sanctions resolutions 748 and 883 were designed to put pressure on the Government of Libya—not its people—to surrender the suspects for trial and to meet the other requirements. We regret that Libya has still not complied. By its failure to do so, it continues to deny justice to the victims or to prove the innocence of the accused.
The House will recall that, on 1 February this year, my right hon. Friend the Member for Witney (Mr. Hurd), who was then Foreign Secretary, reported exchanges that Foreign Office officials had been having with the Libyans about the material and financial assistance that Libya had given to the Provisional IRA, at a time when it was waging a terror campaign against British interests. That was in the context of one of Libya's obligations under the resolutions: to demonstrate its renunciation of terrorism.
At the time, there remained some unanswered questions. Since then, there has been another exchange of questions and answers. As a result, on 20 November last, the Foreign and Commonwealth Office issued a statement making it clear that, while there remained gaps and omissions in the information given by the Libyans, we were satisfied that, when the disclosures were considered in their entirety, they largely met our expectations.
In acknowledging that as a positive step towards Libyan renunciation of terrorism, a path that we hoped that Libya would follow, we made it clear that we regarded Libya's co-operation as just one step in the context of one of its obligations under the resolutions. We remained committed to the UN sanctions against Libya until such time as Libya complied with all the requirements, in particular that it surrender those accused of the Lockerbie bombing for trial in Scotland or in the United States. I can tell the House that we have no further questions to put to the Libyans about that.
At the most recent four-monthly review of sanctions by the Security Council of 22 November, the UK permanent representative to the United Nations, Sir John Weston, drew the attention of the Security Council to the statement on the Provisional IRA questions. He added that we remained committed to bringing to justice those responsible for the Pan Am and UTA bombings, and that

alternatives put forward by the Libyans for trial elsewhere—including The Hague, as the hon. Gentleman said—were simply not acceptable. Sir John Weston reminded the council that all countries must continue to implement the mandatory sanctions rigorously. There was no proposal at that review for a change to the existing sanctions, and they must therefore remain in force.
We have regularly and carefully considered the various proposals that have been put forward from time to time that a trial be held in a third country, and we remain convinced that they are unacceptable and unworkable. The reasons have been stated before in the House, but since the hon. Gentleman has raised the matter, they bear repeating.
First, the practical and legislative difficulties would be enormous. They would involve secondary and possibly primary legislation in both countries.
Secondly, it would be quite unacceptable to the Government, as well as to the House, effectively to allow suspected terrorists to dictate where and how they should be tried. The Scottish and US courts both have jurisdiction. The trial should be held in one of those jurisdictions.
Thirdly, the Security Council resolutions call for a trial in the UK or the US.
Fourthly, holding the trial in a third country might imply that the Lockerbie suspects could not get a fair trial in Scotland. The Libyan Government indicated in 1993 that they accepted that the suspects would get a fair trial in Scotland.
Finally, even if it were possible to set up such a court, there is no credible guarantee that the suspects would be made available for trial. Even if all the other difficulties that I have just outlined were resolved, I would be most reluctant to set in motion a complex procedure of legislation and international agreements that could too easily lead to nothing.
The Libyan Government have never undertaken to hand the accused over for trial anyway. Indeed, they have maintained that they have no powers to force the suspects to go for trial anywhere. Against that background, the scope for further prevarication after all the arrangements had been put in place would be enormous. So for all those reasons, we have concluded that a trial in a third country remains unacceptable.
We understand that the proposal currently preferred by the Libyans, and endorsed by the Arab League, is a trial before Scottish judges under Scottish law at the seat of the International Court of Justice in The Hague. As I have said, that proposal is unacceptable, for the same reasons as any trial in a third country.
We are conscious that Libya has been under the pressure of sanctions for over three and a half years. Libya's attempts to promote so-called compromise solutions and alternatives to trial in Scotland and the US show that the pressure is having an effect, and we should not waver. The pressure should remain on Libya until it does what the international community demanded in 1992. We ask no more or less than that.
In the meantime, we must at all costs avoid prejudicing the trial. For that reason, we cannot, as has been suggested, show the timer used in the explosion to its manufacturer, or, for that matter, disclose any of the other evidence.
The hon. Gentleman referred to the activities of Mr. Thomas Thurman, an American forensic scientist. The Minister of State, Foreign and Commonwealth Office, my hon. Friend the Member for Upminster (Sir N. Bonsor), told the hon. Gentleman on 10 November that the forensic examination in the Lockerbie investigation was conducted by the Royal Armaments Research and Development Establishment. My noble and learned Friend the Lord Advocate told the hon. Gentleman on 6 October that the Lockerbie case did not depend on any evidence that Mr. Thurman might give.
What may or may not have happened in the United States to cause the FBI to investigate the activities of Mr. Thurman has no bearing on the evidence that forms the basis of the Scottish petition warrant.
Widely diverging stories have appeared in the press and elsewhere on the recovery of fragments of the timer in that case. Those stories have been based on speculation, and it should therefore come as no surprise that they are indeed divergent. I can go into no further detail on the evidence, which includes recovery of any of the physical evidence, for fear of prejudicing the case.
As in the case of Libya, the aim of sanctions against Iraq is clear. It is to ensure that Iraq fully complies with its obligations under the relevant UN Security Council resolutions. It is simply not true to say that sanctions are not working. They have achieved a measure of Iraqi compliance with the requirements of UN Security Council resolutions—notably, Iraqi recognition of Kuwait and UN-demarcated borders.
Without the pressure of sanctions, it is unlikely that Iraq would have revealed to the UN special commission information on its development of weapons of mass destruction. UNSCOM has recently discovered the horrifying capabilities that Iraq has tried to conceal: enough chemical and biological weapons to kill the world's population several times over. UNSCOM's work on Iraq's weapons of mass destruction programme is essential for the security of the region, indeed the world. We give it strong support.
Nevertheless, Iraq still falls short of its other obligations. Time permits me to mention only a few. First, despite UNSCOM's recent discoveries, much remains to be done in respect of Iraq's weapons of mass destruction programme. Secondly, Iraq has an appalling human rights record. To hon. Members who have a strong stomach, I commend the recent report by the UN's special rapporteur on human rights, Mr. van der Stoel, which recounts nauseating acts of torture committed by the Iraqi regime, as well as denial to Iraq's population of the most basic human rights. Thirdly, Iraq has failed to account for the whereabouts of more than 600 missing Kuwaiti and third-country nationals and property, including military hardware, stolen from Kuwait.
Recent history shows that Saddam Hussein cannot be given the benefit of the doubt. The UN Security Council reviews sanctions every 60 days in the light of Iraq's behaviour. At the last review on 8 November, it agreed that sanctions could not be modified. There is no doubt that that was right. Sanctions must be maintained until Iraq fully complies with its international obligations under relevant UN Security Council resolutions.
We share the concern of many right hon. and hon. Members about the desperate plight of Iraqi citizens. The hon. Member for Linlithgow said that we were making enemies of a whole generation of young Iraqis, but I wonder whether it is right to make enemies of the rest of the world. It is nonsense to blame the shortages and deprivations on the UN. Food and medicines are not subject to sanctions.
Rather than buy food, Saddam Hussein has chosen to spend the regime's limited resources on military procurement, ostentatious construction projects and luxury items for his hangers-on. For example, Mr. van der Stoel notes that members of the Ba'ath party and military officers have their own food distribution network. Saddam, not the UN, bears full responsibility for the suffering of the Iraqi people.
To try to alleviate the suffering of the Iraqi people, the UK played a leading role in the unanimous adoption of UN Security Council resolution 986, which would allow Iraq to export a substantial quantity of oil in return for humanitarian aid. The resolution was designed to accommodate criticisms of earlier offers made by the UN under resolutions 706 and 712. It increases the amounts of oil that Iraq could export and is more flexible in the arrangements for monitoring distribution of supplies. Were it to implement resolution 986, Iraq could purchase substantial amounts of humanitarian supplies. The hon. Gentleman said that this was about $6 or $7 per person per month. That is approximately $2.5 billion-worth per annum. That compares with $5 billion spent on all civilian goods before the Gulf war. Sadly, Iraq has refused to implement it. We urge Iraq to implement this humanitarian resolution, to relieve the suffering of the Iraqi people.
We have also been helping the Iraqi people more directly. Since 1991, we have given more than £72 million to the humanitarian effort in Iraq. The Overseas Development Administration is also spending substantial sums on aid to Iraq this financial year. I pay tribute to the British and other humanitarian non-governmental organisations working in the area, and to the group from the Scottish churches. My right hon. and learned Friend the Secretary of State asked me to meet them only last week. I did, and I was pleased to listen to them and discuss matters, but they too recognise that resolution 986 has been implemented by a unanimous international agreement.
The recent developments in the resolution of the Bosnia crisis are an example of sanctions being effective. The promise of the suspension of sanctions was a key factor in bringing President Milosevic to the negotiating table in Dayton, and in bringing about the signing of the peace agreement. The resulting UN resolution which the Security Council adopted last week was a just reward for that achievement.
Let us pray that the leaders in Libya and Iraq rise to their responsibilities, and take the necessary steps to help their people to answer those who demand justice, and to rejoin the international community of good will whose only aim is to work for peace.

Question put and agreed to.

Adjourned accordingly at twenty-nine minutes to Eleven o'clock.